U.K. Cable Operator Virgin Media Posts Higher First-Quarter Financials

LONDON - U.K. cable operator Virgin Media, in which entrepreneur Richard Branson owns a small stake, on Wednesday reported improved first-quarter financials as it continued to grow its subscriber base.

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Virgin's earnings for the opening quarter of 2012 more than doubled to £7 million ($11.3 million) from £3 million, and operating profit increased by 18 percent to £131 million ($211.4 million). Operating cash flow didn't see much of a change though as the company spent more on advertising, including a TV spot touting the speed of its broadband service that featured sprinter Usain Bolt and founder Branson. Revenue rose 2.4 percent to £1.0 billion ($1.6 billion).

Net cable customer additions of 21,200 reflected improved customer churn and compared with 20,200 in the year-ago period, the company said. It ended March with a total of nearly 4.83 million consumer cable customers.

Virgin again benefited from a relationship with DVR pioneer TiVo. The cable operator's TiVo customer base grew by 242,000 to 677,100 in the latest period, or 18 percent of its TV user base. And the company also saw its broadband and mobile phone customers grow.

"In the first quarter of 2012, we've made steady progress against our strategy," said CEO Neil Berkett. Demand for super-fast broadband and TiVo, the U.K.'s first mass-market connected TV service, continued to gather momentum."

He added: "We have seen an increase in [average revenue per user] and greater customer loyalty with our best subscriber retention for two years, and this has reinforced our confidence that people increasingly appreciate the value of a genuinely next generation digital experience."

"[Customer] additions beat all consensus estimates," said Collins Stewart analyst Thomas Eagan about the results. "We are "buy"-rated on Virgin Media as we expect the company to continue to grow faster than many of its peers due to its cost-effective expansion of its footprint and average revenue per user increases."

"The subscriber trends are improving and the foundations are being laid for future competitiveness," said Miller Tabak analyst David Joyce. "Virgin Media added customers in all of its product lines - video subs had been on a general downtrend due to strong competition from British Sky Broadcasting."

Berkett on the firm's conference call emphasized that Virgin Media was "the first and best provider" of connected TV services in the country, saying that the TiVo services is helping to unlock content discovery. For example, its users watch more pay TV compared to free TV than other customers, he said.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai