Sally Banks
Virgin Media Q4: Mobile acquisition driving growth
Virgin Media (formerly NTL:Telewest and Virgin Mobile) announced its Q4 results yesterday with revenues up 18% year-on-year to £1,082 million, largely due to the £960 million acquisition of Virgin Mobile in 2006. Cable revenues increased slightly, up 1.7% year-on-year to £813 million. As a result of the Virgin Mobile acquisition and integration costs, Virgin media recorded a net loss of £122 million, an increase of 54% on Q4 2005.Comment: Although revenues for all segments (cable, mobile and content) improved from Q3 to Q4 2006, the only real growth was seen in the mobile segment, which didn't exist in 2005, when you compared year-on-year results for the quarter. Content revenues were flat at just under £117 million and the slight increase in cable revenues failed to make a dent in the huge costs incurred by both the merger of NTL and Telewest, and the acquisition of Virgin Mobile.On the plus side, the future looks more positive for Virgin Media. Leaving the tainted NTL brand behind, the more positively received Virgin brand should stand the company in good stead in competing against the likes of Carphone Warehouse and Orange in the broadband space, both of which have received criticism from customers waiting to connect to their 'free' broadband services. The mobile segment increased revenues by 8% between Q3 and Q4 2006, as a result of an increase in the number of higher ARPU contract customers and increased usage together with new services like MobileTV. Good growth is expected in 2007 as a result of cross-selling with other Virgin Media products such as cable TV and broadband.In addition, the company has begun to realise synergy savings from the merger of NTL and Telewest, through headcount reductions and integrated billing solutions which should become evident in its 2007 quarterly results. Rollout of new products such as HDTV, video on-demand and DVR will also help drive ARPU and enable Virgin Media to compete more effectively against the UK's dominant pay-TV provider - Sky, with which it is currently locked in an arbitration battle over resale rights.
