Report Overview

Virgin Media UK: contemplating its strategic future as pressure mounts

Q1 results evidenced the downturn that Virgin Media had flagged in February. Consumer cable weakened sharply to just 1% growth vs 3%+ historically, partly thanks to ‘increased promotions in response to market dynamics’

Monetising Virgin’s speed advantage is becoming more challenging. Competition is hotting up for high-speed broadband in particular, fuelled by Openreach targets for smaller players and BT’s full fibre and G.fast rollouts

The company faces two vital strategic decisions – whether to wholesale BT’s fibre products outside its footprint, and whether to allow wholesale access to its own network. The former is likely to have the most legs and offers an alternative to further Lightning extension

Contents

Consumer cable and ‘other’ behind the downturn

What’s weighing on consumer cable?

• Decent quarter for subscribers save for TV
• ARPU down due to market dynamics and other factors
• OCF weak, cashflow boosted by much lower capex

Lightning roll-out is cautious, other opportunities beckon

• Lightning economics are finely balanced in a changing landscape

Monetising speed advantage becoming more challenging

Openreach fibre expansion a competitive threat

Wholesaling Openreach fibre a growth opportunity….

…which calls extent of Lightning expansion into question

Wholesaling own network concedes on speed advantage

List of charts/tables

Figure 1. Virgin Media revenue and OCF growth

Figure 2. Virgin Media UK and Ireland revenue change by division (£m)

Figure 3. Virgin Media UK and Ireland revenue growth by division

Figure 4. Virgin Media UK consumer cable operating performance – net adds and churn

Figure 5. Virgin Media UK cable revenue and operating statistics (residential and SOHO)

Figure 6. Subscriber and ARPU growth

Figure 7. Virgin Media UK and Ireland operating performance

Figure 8. Project Lightning progress (000)

Figure 9. Homes passed (m)

Figure 10. Comparison of Openreach wholesale and Lightning rollout options

Figure 11. Speed capabilities by type of broadband access