Bloomberg News

Virgin Media Drops After Customer Cancellation Rate Increases

October 27, 2011

Oct. 27 (Bloomberg) -- Virgin Media Inc., the U.K.’s second-largest pay-television company, dropped the most since January 2009 in New York trading after its average monthly customer cancellation rate rose in the third quarter.

The cable-customer cancellation rate was 1.7 percent compared with 1.6 percent a year earlier and 1.4 percent in the previous three months, the Hook, England-based company said in a statement today. The stock fell as much as 12 percent and traded 7 percent lower at $25.93 as of 11:12 a.m. in New York.

“There is evidence that Virgin Media is having to work harder to retain customers” as the cancellation rate “ticked up,” Morgan Stanley analysts led by Nick Delfas wrote in a note today.

The company added 6,300 cable customers on a net basis after losing 36,000 in the prior quarter. Virgin Media competes with BT Group Plc, the U.K.’s largest fixed-line telephone company, in high-speed fiber lines. Virgin Media has 4.8 million customers, with more than a quarter taking speeds higher than 20 megabits-per-second.

Operating profit rose 2.8 percent to 398 million pounds ($637 million), less than the 404 million-pound average of five analysts’ estimates compiled by Bloomberg.

Virgin Media is rolling out its 100 megabits-per-second broadband service and has started its Internet-connected TV offering from TiVo Inc. to persuade customers to take high-speed services.

Marketing Expenditure

“Our customers are actually showing us that they are prepared to pay for quality,” Chief Financial Officer Eamonn O’Hare said today in an interview. “We have a responsibility, alongside BT, to stimulate that.”

Virgin increased marketing spending by about 10 million pounds to advertise the TiVo service, O’Hare said.

The company will also meet with U.K. regulator Ofcom over BT’s revised offer for access to its network infrastructure, O’Hare said.

BT’s proposal is a “nudge in the right direction,” O’Hare said. There will be an “ongoing tussle back and forth to get economic access.”

Fujitsu Ltd. had warned it required fairer terms to tap the U.K. infrastructure to build a rival fiber broadband network to 5 million homes for as much as 2 billion pounds.

--Editors: Robert Valpuesta, Simon Thiel.

To contact the reporters on this story: Jonathan Browning in London jbrowning9@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net

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


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