Rebased Revenue Growth of 4.1% to £1.275 billion in Q2
Record Q2 RGU Additions of 112,000 and Cable ARPU Growth of 1.6%
Added 118,000 Lightning Premises During Q2, Total Now 1.3 Million
Virgin Media Inc. (“Virgin Media”) is the leading cable operator in the U.K. and Ireland, delivering 14.5 million broadband, video and fixed-line telephony services to 5.9 million cable customers and mobile services to 3.1 million subscribers at June 30, 2018.
Operating highlights:
• Enhancements to our customer propositions have successfully driven RGU and ARPU growth in Q2
◦ Q2 monthly cable ARPU was £51.11, a 1.6% YoY increase on a rebased basis
◦ Delivered record Q2 RGU additions of 112,000, up 44% YoY with growth from our existing and new build footprint. This was driven by our core offers in the U.K. focused on triple-play bundles, which included a doubling of broadband speeds combined with our V6 box
▪ A focus on triple-play acquisitions and cross-sell of video to existing customers drove an 80 basis points sequential improvement in triple-play penetration to 63.2% in Q2
▪ Higher levels of customer satisfaction led to a 20 basis point YoY reduction in churn to 15.0% in Q2, the third consecutive quarter of sequential churn improvement
◦ Delivered Broadband RGU additions of 30,000 in Q2, with strong demand for higher speeds
▪ At the end of Q2, 76% of our broadband customers subscribed to speeds of 100+ Mbps and 61% enjoy our best-in-class Hub 3 WiFi router
• Added a record 45,000 video RGUs in Q2 supported by demand for our cutting-edge V6 box, which is now taken by 1.9 million subscribers, representing 48% of our U.K. video base
◦ Enhanced our sport offering by adding BT Sport 4K UHD and FreeSports channels
◦ In July, UKTV removed its channels from Virgin TV. We have invested in new programming including Premier Sports, Paramount Network and numerous box sets
◦ In July, signed a new three-year deal with ITV offering an expanded range of content
• Postpaid mobile additions more than doubled to 49,000 in Q2, from 22,000 in Q2 2017. Postpaid growth was partially offset by 28,000 prepaid losses resulting in 21,000 net mobile additions in Q2
◦ 4G subscriptions now represent 68% of our postpaid mobile base
◦ 36% of our U.K. mobile base has migrated to our full MVNO platform since November 2017
• Q2 B2B rebased revenue growth was underpinned by a 28% YoY increase in our SOHO RGU base
• Added 118,000 marketable Lightning premises in Q2 and 1.3 million premises since project launch
• TV3 Group in Ireland to rebrand as Virgin Media Television at the end of August
◦ In May, TV3 secured access to all UEFA League matches for the next three years to be broadcast in Ireland on Virgin Media Sport, a new channel launching in August 2018
• Announced the appointment of Lutz Schüler as Chief Operating Officer effective September 2018
Financial highlights:
• Record Q2 rebased revenue growth of 4.1% since LG acquisition, driven by a 1.8% YoY increase in our residential and SOHO RGU base and increases in cable ARPU and residential mobile revenue
• Rebased residential cable revenue growth of 2.4% in Q2 reflected higher subscription revenue
• Residential mobile revenue increased 16.1% in Q2 on a rebased basis due to higher mobile handset sales compared to Q2 2017, resulting in rebased mobile non-subscription revenue growth of 47.4%
◦ Mobile subscription revenue declined 1.2% on a rebased basis in Q2 primarily as a result of lower out of bundle usage, which was partly driven by regulatory changes
• B2B revenue increased 2.7% in Q2 on a rebased basis driven by higher SOHO revenue
• Rebased Other revenue growth of 15.4% in Q2 was due to an increase in TV3 advertising revenue
• Operating income decreased 17.4% YoY to £58.3 million in Q2, as Segment OCF growth, as described below, was offset by higher related-party fees and allocations and higher depreciation and amortisation
• Rebased Segment OCF growth of 2.4% in Q2 was negatively impacted by a nonrecurring benefit in the prior year of £22.5 million associated with a telecom operator’s agreement to compensate Virgin Media for certain prior-period contractual breaches related to network charges
◦ In Q2, we received a further £3.9 million of compensation for prior-period contractual breaches but this was offset by a £5.0 million increase in costs due to the reassessment of an accrual and a £3.6 million increase in network taxes following an April 1, 2017 increase in the rateable value of our existing U.K. networks, which is being phased in over a five-year period to 2021
◦ Aside from these items, rebased OCF growth was the net result of (i) increased revenue, (ii) higher handset costs and (iii) lower marketing costs
• Property and equipment additions decreased to 27.7% of revenue in Q2 compared to 35.9% in the prior-year period driven by lower spend on new build and upgrade and product and enablers
◦ New build and upgrade decreased by £36.7 million or 23.9% YoY due to a lower volume of Lightning releases and a change in our build mix
◦ Product and enablers spend was £28.2 million or 43.1% lower YoY reflecting completion of our mobile transformation programme
• At June 30, 2018, our fully-swapped third-party debt borrowing cost was 4.8% and the average tenor of our third-party debt (excluding vendor financing) was 6.9 years
• At June 30, 2018, and subject to the completion of our corresponding compliance reporting requirements, the ratios of Senior Secured and Total Net Debt to Annualised EBITDA (last two quarters annualised) were 3.79x and 4.76x, respectively, each as calculated in accordance with our most restrictive covenants
◦ Vendor financing obligations are not included in the calculation of our leverage covenants. If we were to include these obligations in our leverage ratio calculation, the ratio of Total Net Debt to Annualised EBITDA would have been 5.23x at June 30, 2018
• At June 30, 2018, we had maximum undrawn commitments of £675 million equivalent. When our compliance reporting requirements have been completed and assuming no change from June 30 borrowing levels, we anticipate that £455 million equivalent will be available to be drawn
• Subsequent to June 30, 2018, a portion of the net proceeds Liberty Global received from its sale of UPC Austria were used to redeem (i) in full the £250 million principal amount of the 7.0% 2023 VM Sterling Senior Notes and (ii) $190 million (£144 million) of the $530 million (£402 million) principal amount of the 6.375% 2023 VM Dollar Senior Notes
The full Liberty Global fixed income release for Q2 2018 can be found here
The Liberty Global Q2 2018 press release can be found here
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