Strong growth helps Virgin Media beat forecasts

To offer superfast broadband by end of year

LONDON -- Cable operator Virgin Media thumped its financial forecasts in the fourth quarter after adding a better-than-expected 28,600 net cable users and extracting more money from each customer.

The firm, which competes with pay TV company BSkyB and telecoms groups such as BT, also showed it was winning the battle to offer the fastest broadband speeds in the country, as it unveiled plans for a new 100 Mb service.

Virgin Media said the average amount cable customers were paying in the quarter rose by 5.8%.

That was boosted by the number of subscribers taking three products of either pay TV, broadband, fixed and mobile telephony, up at a record of 60.5%. The percentage of customers taking four products rose to 10.7%.

The amount each user is paying is also likely to rise higher in the coming months, as Virgin introduces a set of price rises and the new superfast broadband speed offering.

Analysts have interpreted the rise in prices as a sign of confidence in the Virgin Media product.

chief executive Neil Berkett told Reuters the group had benefited from upselling and cross-selling products to customers and drawing in new subscribers to its cable and non-cable networks.

"That's the best net adds we've had since the merger," Berkett said. "It's showing the business is really starting to generate a rhythm."

Virgin then benefits from the fact it has high operational leverage, meaning any additional income goes through to the bottom line. Virgin Media's free cash flow grew 55.1% to £86 million ($131.6 million).

The improved operating performance enabled Virgin to post fourth quarter revenues of £980 million ($1.5 billion), compared to a Reuters poll expecting £963 million ($1.47 billion).

The key operating cash flow figure was £366 million ($560 million), up 15.3%, compared to a forecast of £352 million ($538.7 million).

Virgin Media said it would begin the roll out of its 100Mb broadband service, the fastest available commercial product in Britain, by the end of 2010.

"The launch of Virgin Media's 100Mb service will be a historic moment and will mean the U.K. will be comparable to other leading broadband nations," said Berkett.