We reaffirm our long-term Neutral recommendation on
Virgin Media Inc.
), one of the leading pay television and fixed-line telephone
services provider in the United Kingdom, following its robust
third-quarter 2012 results. Both the top and bottom line of the
company topped the respective Zacks Consensus Estimate.
Virgin Media is gradually rolling out the super-fast DOCSIS
3.0 network offering downstream speed of 100 Mbps and an upstream
speed of at least 10 Mbps. The 100 Mbps network will be available
throughout the UK by the end of 2012. The company currently
offers DOCSIS 3.0 network in three different tiers; providing
downstream speed of 10 Mbps, 20 mbps, and 50 Mbps, respectively.
At the end of the previous quarter, over 1.3 million customers
subscribed to either 30 Mbps or higher services, constituting 31%
of total cable Broadband subscribers. More than 590,000 customers
are using 50 Mbps tier or higher tier services.
Further, Virgin Media and
) jointly made major software updates for their next-generation
TV platform. The TiVo companion application will enable Virgin
Media customers to use their Apple iPADs to interact directly
with their TiVo service while extending their viewing experience
beyond the remote control. The company is negotiating with video
streaming service providers, such as Netflix and Amazon.com's
Lovefilm to add shows and movies to its TiVo DVR boxes.
Virgin Media started offering a next-generation web TV
platform to its subscribers. Virgin Media is utilizing TiVo
Inc.'s industry leading set-top boxes for this innovative
offering. Moreover, the company has also entered into the cloud
computing services for its business customers.
Despite such positive traits, highly competitive UK telecom
market with low barriers to entry may act as headwinds for the
company going forward. Moreover, a joint collaboration between
the BBC, ITV, Channel 4, BT Group, Talk Talk and Arqiva has
become a major threat to Virgin Media.
Currently, Virgin Media has a Zacks #3 Rank, implying a
short-term Hold rating on the stock.
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VIRGIN MEDIA (VMED): Free Stock Analysis
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