Bloomberg News

Virgin Media Brings Forward $1 Billion Stock Buyback Program

July 27, 2011

(Updates with CEO comment starting in third paragraph.)

July 27 (Bloomberg) -- Virgin Media Inc., the U.K.’s second-largest pay-television company, brought forward its second capital return plan, saying it will buy back as much as 625 million pounds ($1.03 billion) in stock.

Virgin Media will buy the shares by the end of 2012, taking its total buyback to 1 billion pounds since July last year, the company said today in a statement. The cable company previously said it would consider further returns to shareholders at the end of 2011.

“We did think we would look at this towards the end of the year,” Chief Executive Officer Neil Berkett said today in an interview. “The stock is undervalued and so therefore it would be appropriate to buy the shares back and at some point in time we would consider increasing the dividend.”

Virgin Media, which is currently rolling out its 100 megabits-per-second broadband service, lost 36,000 net customers in the second quarter. The Hook, England-based company is pushing subscribers to take faster, more expensive broadband offerings to increase revenue.

Investors fear “the company is pushing pricing power too hard given the U.K.’s pallid economic growth,” said Robin Bienenstock, an analyst at Sanford C Bernstein in London.

Virgin Media declined 3.2 percent to 1,665 pence at 8:54 a.m. in London trading.

BSkyB Review

The company, which has 4.8 million cable customers, won’t increase its net additions “significantly” in the next few quarters, Berkett said today. “We decided that we would continue to aim towards high-quality customers and not chase customers for customers’ sake.”

Virgin Media is also waiting for the U.K. Competition Commission to report on rival British Sky Broadcasting Group Plc’s pay-TV premium movie service. BSkyB has consistently earned “excess profits” on the service, the regulator said in February.

Virgin, which currently doesn’t have “economic access” to the service, will seek to compete with BSkyB, Berkett said today. “The consumers don’t have any choice, they’re locked into acquiring their first-release movies through Sky,” he said. “It’s important that we do create choice for consumers in this window and we’ll do what we can to make that happen.

--Editors: Robert Valpuesta, Simon Thiel.

To contact the reporter on this story: Jonathan Browning at jbrowning9@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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