Virgin cuts loss, but it ain't pretty

BSkyB dispute costly; Q2 subscriber additions skid

U.K. cable and telephony operator Virgin Media saw more than 70,000 customers quit its services in the second quarter as the beleaguered company — which indefinitely postponed its planned $11 billion sale, blaming debt market turbulence — said Wednesday that its loss for the period narrowed by about 40%.

Virgin Media, whose biggest shareholder is entrepreneur Richard Branson, said the decline to an overall customer base of 4.7 million came amid fisticuffs with News Corp.-controlled U.K. satellite TV giant British Sky Broadcasting, which saw the firm withdraw a bouquet of channels from Virgin's service.

Virgin Media estimates that it lost 40,000 customers in the second quarter on the back of its dispute with BSkyB.

The two pay TV operators are engaged in a legal battle, with Virgin accusing BSkyB of abusing its dominant position in the pay TV market. Virgin stopped carrying several Sky channels in March after the two sides failed to agree on the fees BSkyB would pay.

The group, birthed this year from the union of NTL, Telewest and Virgin's mobile phone division, said Wednesday that it had 2,200 net additions to its TV service in the second quarter, down from 36,100 in the previous quarter because of the BSkyB dispute.

COO Neil Berkett said in a conference call he is confident that Virgin Media has now stemmed customer losses. "We have absolutely weathered the storm," he said.

Virgin Media also said that its broadband customer numbers rose by 51,000 in the frame to 3.5 million and that its outlook for the rest of the year "remained strong."

Virgin Mobile contract customers in the second quarter rose by 53,000 to 299,000, the firm said.

The company reported a quarterly loss of £119 million ($242.4 million), down from a loss of £195.8 million a year ago.

Operating income before depreciation, amortization and other charges climbed from £305.7 million last year to £315.3 million ($639.1 million).

Second-quarter revenue rose from £884 million a year ago to £995 million ($2 billion).

"The second-quarter results show encouraging broadband and mobile contract growth, a resilient performance by our TV business and signs that our fixed-line telephony business performance is starting to react to renewed management focus," Virgin Media CEO Steve Burch said.

On Tuesday, Virgin Media postponed the sale of the company after it became apparent that buyers would not have access to the debt needed to do a deal right away.

Shares of Virgin Media, which are listed on the Nasdaq in New York, closed up 4.2% on Wednesday at $24.47.

Georg Szalai in New York and Reuters contributed to this report.
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