Virgin Media's Cable Expansion Lags Targets – Report

Virgin Media's network expansion project, dubbed Project Lightning, has fallen well behind schedule, according to a report from the UK's Daily Telegraph newspaper.

The cable operator, which competes against fixed-line incumbent BT Group plc (NYSE: BT; London: BTA) in the UK telecom market, managed to complete work on just 27,199 premises in June against a target of 69,278, according to internal documents the Daily Telegraph says it has seen.

The documents also show that Virgin Media Inc. (Nasdaq: VMED) added just 15% of the 16,467 connections it was targeting in apartment blocks, and that work on the "infill" of areas near to existing cable lines reached only 43% of a target.

The news comes after Virgin said it had overstated progress on Project Lightning earlier this year by around 142,000 connections and could have nasty repercussions for parent company Liberty Global, which appears heavily dependent on the Project Lightning initiative for the cash flow growth it needs to pay off its debts.

Under Project Lightning, Virgin aims to extend its cable footprint to about two thirds of the UK population, having historically been able to serve just a half of UK premises.

The errors revealed earlier this year led to the suspension of some employees and greater oversight by Liberty, whose chief transformation officer -- Dana Strong -- rejoined Virgin as chief operating officer in May. (See Eurobites: Virgin Cuts Jobs in Wake of Fiber Rollout Ructions.)

Strong was previously chief operating officer of Virgin in 2013 but subsequently moved into a group role.

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Virgin told the Daily Telegraph that its sales and build costs were tracking in line with expectations, but the newspaper also says the documents it has seen highlight a shortfall in new customers via the retail channel.

In June, it reports, Virgin attracted only 57% of the 20,445 customers it had budgeted.

Virgin Media first announced plans for Project Lightning back in February 2015, saying it would spend £3 billion ($3.9 billion, at today's exchange rate) on extending its superfast cable network to another 4 million homes and businesses by 2020. (See Virgin Media Plots £3B Invasion of BT Turf.)

However, in its first-quarter earnings report in May, which came after the company revealed it had overstated progress on Project Lightning, Liberty said it was anticipating a "slower build pace" than Virgin had previously expected for 2017 and would provide an update after its second quarter.

Liberty said that Virgin had "delivered" 102,000 new premises in the first quarter and a total of around 700,000 homes up to that point.

Virgin has historically boasted an advantage on connection speeds over BT and currently markets higher-speed broadband offerings than its chief infrastructure rival.

But BT is now investing in a copper-fortifying broadband technology called G.fast that it claims will boost connection speeds to about 300 Mbit/s for around 10 million UK premises. It is also investing in even higher-speed fiber-to-the-home connections for around 2 million premises. (See G.fast Could Use a Boost.)

According to advertising, BT's highest-speed residential offering delivers 76 Mbit/s to customers, while Virgin's supports connections speeds of as much as 200 Mbit/s.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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