Virgin Media Reports 4Q07

Revenues were £1.05B, up from £1.01B in Q3, mainly due to growth in consumer and content revenue

February 29, 2008

4 Min Read

LONDON -- Virgin Media Inc. (NasdaqGS:VMED - News) announces results for the quarter ended December 31, 2007.

Quarterly highlights

  • Significant improvement in customer and RGU growth

    • 272,100 total RGU(1) net additions (Q3-07: 186,700); best quarter since merger

    • 24,400 on-net customer net additions (Q3-07: 13,000); best quarter since merger

    • On-net churn declined to 1.4% (Q3-07: 1.7%); lowest since merger

    • 111,200 total broadband net additions (Q3-07: 122,900)

    • 52,300 total telephony net additions (Q3-07: 13,700); highest since Q2-042

    • 61,100 TV net additions (Q3-07: 20,400); best quarter for seven years(2)

    • 47,500 contract mobile net additions (Q3-07: 29,700)

  • On-net cable ARPU increased to GBP 42.24 (Q3-07: GBP 41.55)

  • Record triple-play penetration of 49.5% (Q3-07: 47.0%)

  • OCF of GBP 321m (Q3-07: GBP 342m included certain benefits (as referred to below))

  • Operating loss of GBP 18m (Q3-07: GBP 47m income included certain benefits (as referred to below))



(1) -- excluding prepay mobile subscribers.
(2) -- pro forma for cable merger in March 2006

Neil Berkett, Acting Chief Executive Officer of Virgin Media, said:

"Our fourth quarter results represent our best operational performance since the cable merger in early 2006. They demonstrate that our customers are responding positively to a compelling consumer proposition combined with the strength of the Virgin brand. We are achieving good results from our stated strategy of exploiting our superior network capability to drive broadband growth and deliver the next generation of personalized on-demand content, as well as focusing on reducing churn.

I am encouraged by our ARPU performance in what is a competitive market, partly due to our successful bundling, cross-selling and up-selling. I am also particularly pleased with the sharp decline in churn, given the extra focus that we have placed on this area.

With a strong brand, superior products, and improving service and operations, we believe we are well placed for continued growth and cash flow generation."

RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2007

TOTAL REVENUE

Total revenue in the fourth quarter was GBP 1,050.6 million (Q3 2007: GBP 1,006.2m). The increase was mainly due to growth in Consumer and Content revenue, as discussed below.

OPERATING INCOME BEFORE DEPRECIATION, AMORTIZATION AND OTHER CHARGES (OCF)

OCF was GBP 321.0 million in the fourth quarter (Q3 2007: GBP 341.5m). The decline was due to the decrease in both Content and Mobile OCF partially offset by the increase in Cable OCF as discussed above.

OCF in the third quarter had benefited from a number of items as disclosed in our Third Quarter 2007 Results press release, dated November 7, 2007.

We expect that OCF in the first quarter of 2008 will be affected by lower business revenues as discussed above, plus anticipated higher employee incentive-based and stock-based compensation expense. These expenses, which are largely performance related, are anticipated to be higher in the first quarter of 2008 as compared to the fourth quarter of 2007, reflecting our expectations that a greater percentage of the performance targets will be achieved in 2008 compared with the level achieved in 2007.

OCF is a non-GAAP financial measure. See Appendix E for reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.

Operating Loss and Net Loss from Continuing Operations

Operating loss was GBP 17.8 million (Q3 2007: GBP 46.7m income) with the decrease mainly due to the decrease in OCF discussed above, higher other charges and an increase in depreciation expense. In addition, other (income) charges in the previous quarter had included certain benefits as disclosed in our Third Quarter 2007 Results press release. Other charges were also higher due to increased involuntary employee termination and related costs, primarily in connection with the closure of our venue sales channel, and revisions to estimates concerning lease exit costs for commercial properties included in our restructuring programs.

Operating loss was GBP 17.8 million compared to income of GBP 9.2 million in the fourth quarter of 2006 with the decrease due mainly to increased depreciation and other charges.

In the fourth quarter, interest income and other, net, includes gains on disposal of investments, that were more than offset by losses on disposal of fixed assets. Accordingly, a net charge of GBP 6.1 million has resulted.

Net loss from continuing operations was GBP 163.2 million (Q3 2007: GBP 61.0m) and compares with a net loss from continuing operations of GBP 88.1 million in the fourth quarter of 2006. The increase in net loss compared to the previous quarter and to the same quarter last year was mainly due to reduced operating income, reduced interest income and other, increased interest expense and increased foreign currency transaction losses.

Virgin Media Inc. (Nasdaq: VMED)

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