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Virgin Media stops the rot

Punters coming back to cable

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Virgin Media has confirmed a turnaround in its fortunes today with news it has reversed the flow of customers away from it following its embarrassing public defeat over TV rights by Sky.

For the three months to 30 September across broadband, TV and home phone, the group added 13,000 net new punters. In the previous quarter, net 70,000 quit Virgin. Overall churn was brought down 0.1 of a per cent to 1.7 per cent.

New chief exec Neil Berkett's plan to focus on broadband as the firm's biggest market advantage was given hard data to back it up by news Virgin converted 115,800 to cable internet over summer, compared to 45,800 in the previous three months.

The market-wide slowdown in broadband predicted yesterday by Point Topic didn't show itself in Virgin's results. We'll have to wait for BT's results tomorrow to see if rumours of the demise of broadband growth are exaggerated, or if cable has benefitted at others' expense.

Virgin confirmed the next stage of efforts to further differentiate itself by ramping maximum downloads speeds up to 50Mb/s in 2008. To that end, it's reviewing an implementation of DOCSIS 3, a newer cable standard, which is capable of downloads in the hundreds of megabits per second.

Customer numbers were much better than City analysts had expected. They had predicted that Q3 would see a smaller exodus than last time, but still fewer net users.

Total revenues were down slightly on a year ago, however, at £1bn from £1.02bn. That's despite a year-on-year increase in triple-play custom from 38.7 per cent to 47 per cent. Average revenue per user fell from £42.16 to £41.55.

Virgin blamed the drop on its efforts to tempt new customers with offers in the highly competitive market.

Operating income was up to £46.7m from £3m in the previous quarter and a £9.6m loss a year ago. Most of the rise was due to lower than expected employee incentive payments and income from subleasing a vacant property.

The small operating profit was wiped out by interest payments on Virgin's massive debts, making for a net loss of £61m. Still, a year ago it lost £300m, so there's progress. Berkett promised more: "With the cable merger integration expected to be complete by year end, we can focus on continuing to improve the fundamentals, enhancing our products, reducing our churn, and delivering on our competitive strengths."

Virgin's full offical earnings report is here. ®

5 things you didn’t know about cloud backup

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