Virgin Reports Q3 KPIs

LONDON -- KPI highlights

Tom Alexander, Chief Executive of Virgin Mobile, said:

"I am delighted to report another strong set of results for Virgin Mobile this quarter. Our top line service revenue growth continues to be industry leading, with our highest year on year growth for over twelve months. Our continuing strategy of attracting high quality customers in the prepay segment fuelled our growth during the quarter.

“Our entry into the contract market gathered pace during the quarter, with the number of distribution outlets doubling and the launch of our contract advertising on television featuring Kate Moss. We will continue to roll out our contract proposition to further outlets over the next quarter, with additional expansion planned for FY2007.

“We begin 2006 in a strong position, with industry leading revenue growth, rising ARPUs and a growing customer base, and therefore look with confidence to the future. Our discussions with ntl about a potential offer are ongoing and we will make further announcements about these in due course.”

Service Revenue growth and rising ARPU

Service revenue growth continued to gain momentum with a market leading 20.3% growth over the quarter compared to a year ago. This represents a significant increase on our underlying H1 2006 service revenue growth of 17.9%, with well over half the growth being generated from the prepay segment. Reported service revenue growth also benefited from the first full quarter without any comparative impact from the Ofcom interconnection rate cuts.

On a 12 month rolling basis, blended ARPU rose to £123; an increase of £2 per customer from £121 at 30 September 2005, reflecting a continuation of recent trends. Monthly ARPU rose for the fourth consecutive quarter, as a result of our successful launch into the contract market and our targeted approach to acquisition of prepay customers.

Non-voice services revenues remain unchanged quarter on quarter at 32.6% of service revenue.

Connections Growth

During the quarter, our active customer base grew strongly with 193,000 net active connections (Q3 FY05: 276,000), driven primarily by a high level of prepay connections at Christmas along with the continued growth in our contract base. Our active customers reached 4,346,000 (up 12.0% year on year).

Our approach to the prepay market during this period was consistent with the strategy adopted in previous quarters, remaining focused on acquiring and retaining high spending customers. This strategy has continued to deliver strong customer growth, with both ARPU and service revenue growth also rising as a result. While this strategy of connecting customers to higher quality handsets incurs commensurately higher SACs, we expect prepay SACs over the second half of the year to be broadly in line with the first half.

Churn on the active customer base, adjusted for temporary connections, marginally increased to 27.5% (H1 FY06: 26.9%). This rise represents a deceleration of the churn growth as it trends towards the industry average.

Virgin Mobile Telecoms Ltd.