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Customer spending boosts Virgin Media

Source: Reuters - Thu 29th Oct 2009

Cable operator Virgin Media added 8,100 net users in the third quarter and pushed its customer's average spend to a record high, boosting its operating cash flow ahead of forecasts.

Virgin Media, which competes with pay-TV company BSkyB and broadband providers such as BT Group, said on Thursday it had increased the average amount customers were paying by 5 percent by selling them more products.

Average revenue per user rose to 44.24 pounds per month, driven by demand for super fast broadband and video on demand television.

The number of customers taking three products of either pay-TV, broadband, fixed and mobile telephony was a record at 59.5 percent, compared with 54.7 percent a year ago, and those taking four products was 10.1 percent.

Churn, or the percentage of customers who dropped the service, remained flat at 1.5 percent a month.

"I wouldn't take our strong operating and financial performance necessarily as a recovery" Chief Executive Neil Berkett told Reuters in an interview.

"Our product set is stronger than it's ever been so I'm not surprised that we're seeing an uplift in terms of demand. But I don't think we're seeing any significant recovery in the broad economic outlook ... What we're seeing is an improvement in our operations."


The growth meant third-quarter revenue was up 1.3 percent at 953 million pounds, while operating cash flow, or underlying operating income, was up 7 percent at 348 million pounds.

Analysts had been expecting net additions of 8,000, revenue of 942 million pounds and operating cash flow of 337 million, according to Thomson Reuters.

Under Berkett, Virgin Media has taken advantage of a cable network that passes through half of British homes to sell its broadband and TV offerings with mobile and fixed line in combined packages.

The group has also exploited its cable network to offer super fast broadband. It added 39,000 broadband net customers in the quarter to give it 3.77 million broadband customers in total, with over 20,000 taking the fastest 50 Mb product.

The TV service added 37,000 net customers to give it a total 3.71 million users, with an average of 66 million video-on-demand views watched per month.

The new products gave Virgin Media 8,100 net new customers on its cable network and a total of 4.74 million.

Analyst Will Draper at brokerage Execution welcomed the results and said the new customer additions and number of customers taking three products were stronger than he had expected.

Shares in Virgin Media trade in the United States and have recently started trading in London, but had not traded by 8:38 a.m.

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