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Virgin Media, Inc. (VMED)

Q3 FY08 Earnings Call

November 6, 2008, 9:00 AM ET

Executives

Richard Williams - Director of IR

Neil Berkett - CEO

Charles Gallagher - Sr. VP of Finance

Analysts

Nick Lyall - UBS

David Kestenbaum - Morgan Joseph & Co Inc

David Gober - Morgan Stanley

Joe Boorman - New Street Research

Steve Malcolm - Arete Research

Paul Howard - Cazenove

Jerry Dellis - JPMorgan

Ian Whittaker - Liberum

Petri Allas - Redburn Partners

David Hawks - MF Global

Alexander Wisch - S&P Equity Research

Presentation

Operator

Good morning and good afternoon ladies and gentlemen and welcome to the Q3 2008 Virgin Media Inc. Earnings Conference Call. My name is Wendy and I'll be your coordinator for this conference. Throughout the presentation you will be on listen-only, however at the end of the call there will be an opportunity to ask any questions. [Operator Instructions].

I will now hand you over to Richard Williams of Investor Relations to begin the conference.

Richard Williams - Director of Investor Relations

Thank you Wendy. Good morning or afternoon to you all and welcome to Virgin Media's Q3 results call. On today's call, we have Jim Mooney, our Chairman; Neil Berkett, our CEO and Charles Gallagher, our Senior VP of Finance.

Please can I draw your attention to the Safe Harbor statement on slide two, and remind you that some of the statements made today may be forward-looking in nature and that actual results may vary significantly from these statements. I would also ask you to refer to our latest filings with the SEC for applicable risk factors.

Before we start can I also point out that we will be hosting two investor days in New York and London next week on the 11th and 13th of November respectively. Can I please urge you to register for these events if you intend to attend. Full registration details are available on our website, www.virginmedia.com/investors.

Now I'll turn you over to Neil Berkett.

Neil Berkett - Chief Executive Officer

Thanks Richard, and thanks for joining the call everybody. Today's presentation will be briefer than normal because of the Analyst Day next week, when we intend to go into much greater detail about all aspects of our business.

I'm pleased to say again that we have delivered another set of solid results. As usual, lets start by looking at our strategic progress and how that's fitting with our operational progress. Our strategic priorities are to leave the next generation broadband marketing speed, quality and value-added services, to lead and redefine the mid-market TV experience through video on demand and to leverage our position in mobile.

We continue to make great progress in Q3. Our 4 to 10 megabits per second broadband upgrade is now complete. And our plans to launch 50 megabits later this year or later this quarter in fact remain on track.

In TV BBC iPlayer continues to boost video on demand usage. In mobile, we've got best ever quarter of contract customer growth, mostly through cross sale to our cable buyers. We further leveraged our mobile position with the launch of mobile broadband in October.

In terms of operational progress, targeting low churn remains our top priority, and this is down 20 basis points year-on-year. As expected, the June price increase has not resulted in any increase in churn.

Despite concerns in some quarters about a softening economy, RGU growth has improved from quarter two and as we said last quarter is roughly the same as the level of Q3 last year.

Broadband net adds have improved sequentially and the number of higher tier subscribers is growing very well. So is TV And we are pleased that we are continuing to grow our telephony base through bundling in a more mature market.

We are effectively using cross sell and upsell and mitigate other pressures which along with price rises has led to an increase in ARPU this quarter. Well over half of our customers are now triple play. Again we saw nearly a 2 percentage point increase in triple play penetration and we continue to experience plenty of further growth going forward.

And finally, we continue to focus on rightsizing our business to get the right cost and organizational structure to position us for the long-term cash flow growth. So lets go into the detail. Starting with churn, which is down 20 basis points year-on-year which is a great achievement.

The biggest improvement has been in voluntary controllable churn. We believe there are several contributing factors and I'll highlight three of them. We have achieved substantially improved key touch points with our customers. We now have a single fit-for-purpose billing system covering all of our cables on the customers and that has defeated some of the quality of service issues we used to have.

Secondly, I've restructured the organization to reinforce the importance of product quality and first time resolution. Both our cool answer [ph] statistics and call rates have measurably improved compared to last year.

Thirdly, value for money affects voluntary churn and we've successfully addressed this to effective management of what we term our backlog, revaluing our own incumbent customers. As we said in last quarter churn is up 20 basis points from the previous quarter, mainly due to a seasonal increase in movement of churn. This includes student churn and rental moves.

Targeting churn remains my number one operational objective, and reducing it is the biggest driver of value in this business.

I'm delighted with the 35% reduction in voluntary churn. Happy customers buy more and stay longer. Churn reductions, improve margin and value. So reducing churn in 2008 compared to 2007 should give us greater growth emphasis going into 2009.

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