VirginMedia Results: Multiplay good, but ARPU down.

IanFogg | February 28, 2008, 12:56 PM

Today, VirginMedia report their q4 2007 results. As usual, as an industry analyst I'll comment solely on the operationals. Note - this is being written ahead of the conference call.

Key points:
- Broadband customers are up year-on-year to 3.5m using VirginMedia's hybrid coax-fibre (HFC) network -- plus another 287k using DSL -- and also up compared with the previous quarter. But the growth is slow, especially when compared with arch-rival Sky's recent broadband successes.
- Cable triple play penetration increases further. Double play is now 79% of customers, and triple is almost half.
- Churn down to a monthly 1.4%, from the flat 1.8% -> 1.6% -> 1.8% -> 1.7% of each the previous four quarters. This quarter's churn may be a blip. Certainly, across the previous four quarters churn was flat while the penetration of bundled customers was increasing. Churn levels remain far too high.
- Telephony customers and total customers fell. I suspect the latter is due to the former as VirginMedia has more telephony customers than either TV or broadband subcribers. Remember, unlike many cable companies, VirginMedia is effectively a home telephony incumbent that is at risk from cheap VoIP and CPS offers, rather than a cable company that could benefit with increased ARPU.
- Per customer [home] ARPU is slightly down to £42.24 from £42.82 a year earlier. Given the penetration of bundled customers has increased during the same period, this reflects the tremendous competitive dynamics of the UK market in driving down prices (broadband especially) has proved a more significant factor than bundling.
- No reporting of quad play penetration that I can see. I presume it is either not at a significant level yet, or is not progressing as well as VirginMedia would like.

Outlook - this is a challenging market for a cable company. VirginMedia must execute well, or Sky and BT will continue to cause VirginMedia problems.

There will be more analysis on the relationship between churn and multiplay in a forthcoming Jupiter report.