Contract overtakes prepay at Virgin Media

Contract overtakes prepay at Virgin Media

Virgin Media has said cuts in mobile termination rates (MTRs) and the shift away from prepay have continued to affect its mobile business, as the division posted a fall in revenue from £560.0m to £552.9m last year.

In its full year financial results, operating income for the entire business increased 67.8% to £540m. For the three months to 31 December, its mobile division revenue was down 4.1% to £142.2m. Virgin Media's operating income more than doubled to £166.3m during the quarter, compared to 2010.

The company said mobile revenue was down because of the continued decline in prepay sales and the impact of changes to MTRs that happened last April. When the impact of MTR changes is removed, Virgin said sales would have increased by around 2.5% during its fourth quarter.

Average revenue per unit (ARPU) increased from £14.55 to £14.91 during the financial year. By the end of the fourth quarter, ARPU was £15.46, compared to £15.16 a year ago.

The company said contract sales increased by 11.7% during the fourth quarter to £97.6m but this was offset by the prepay decline. Pay-as-you-go sales fell by 19.3% to £41.4m. MTR impact during the quarter was £7.4m. Contract customers now outnumber prepay for the first time.

The company increased its contract base by a record 102,500 customers during its fourth quarter. It now has 1.52 million contract customers, up 26% on a year ago. The majority of those additions (101,000) were into cable homes. The company estimates 728,500, or 15% of its cable customer base, has at least one Virgin Mobile contract, up 33% from the beginning of 2011.

However, prepay numbers are down 19% to 1.51 million. Its subscriber base fell by 53,500 during the quarter, compared to 54,200 a year ago.

Quad-play penetration, where a household takes all three Virgin Media cable products and at least one mobile phone service, increased to around 14.5%, up from 12.2% at the beginning of 2011.

Virgin Media CEO Neil Berkett said the mobile business made 'strong progress' last year. He said: 'In a fast-changing industry and an uncertain economic environment, our 2011 results demonstrate the underlying resilience of Virgin Media's business model, with modest revenue growth driving robust OCF and record free cash flow.

'Our next accelerated stock repurchase of $250 million shows our ability and commitment to translate the cash generative characteristics of our business into shareholder value.'

Written by Mobile Today
Mobile Today

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How ironic that Virgin now champions contracts! When it launched with its PAYG proposition around 10 years ago, it was on the premise that contracts w ...
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