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Virgin Media, Inc. (VMED)
Q4 2008 Earnings Call Transcript
February 25, 2009 8:00 am ET
Richard Williams – Director, IR
Neil Berkett – CEO
Jerry Elliott – CFO
Nick Lyall – UBS
David Gober – Morgan Stanley
Jerry Dellis – JPMorgan
Steve Malcolm – Arete Research
Joe Boorman – New Street Research
John Karidis – MF Global
Previous Statements by VMED
» Virgin Media Q1 2008 Earnings Call Transcript
» Virgin Media Q3 2008 Earnings Call Transcript
» Virgin Media, Inc. Q2 2008 Earnings Call Transcript
I'm now handing you over to Richard Williams to begin today’s conference.
Good morning or afternoon to you all and welcome to Virgin Media's Q4 results call. On today's call we have Jim Moony, our Chairman, Neil Berkett, our CEO and Jerry Elliott, our new CFO. I draw your attention to the Safe Harbor statements on Slide #2 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.
Now I'll turn you over to Neil.
Thanks, Richard, and thanks everybody for joining the call. I'm pleased to say that today's fourth quarter results continue to show encouraging progress, operationally, financially, and also against our key strategic priorities.
Before we go into the results, let me give you a brief view of how I think Virgin Media is positioned as we begin 2009. I've discussed before how consumer trends are playing to our advantage. People are consuming increasingly more data and are becoming more demanding about how, where, and when they access information and entertainment.
The increasing focus on the next generation technology apparent in the government's Digital Britain work emphasizes the importance of a future proved Digital Britain in both networks and content and therefore is playing to our strengths.
Quite simply, we have the best network and high quality content to exploit these trends. We deliver our residential customers a next generation capability today. We have a superior broadband product, most recently reinforced by our 50 megabit per second launch and our plans to upgrade all 2 megabit customers to 10. And video-on-demand is becoming a more mainstream product as we expand content and drive usage.
We are delighted with the way customers are responding to our products and most importantly, we have increasing signs the customers are willing to pay for this improving quality. You will see in a minute that our broadband tier mix is improving and ARPU is growing again. We expect 2009 ARPU to show growth on 2008.
We have the platform in place for growth. Our broadband products are winning awards for the speed and quality as consumers are starting to experience and understand the differences between cable and DSL.
We intend to continue to promote and enhance our VOD service to achieve the same halo effect there. We are continuing to leverage our mobile business through contract cross sell and digital penetration.
We have improved service and product reliability to stay and consistent with the Virgin brand. That is no small achievement when you think about where we came from with the legacy reputation of UK Cable. And we continue to reengineer our business to improve efficiency and execution to make us even slicker. We are building a real “Can Do” culture at Virgin Media.
Finally, of course, we're not complacent about the wider economy. It is tough out there and there are challenges, but our results have demonstrated good resilience to the tough conditions. Nevertheless, we remain alert and continue to manage the business and costs proactively to mitigate any effects from the downturn. At the end of the day, the (inaudible) against such conditions will be the compelling products and an efficient cost base and we are working to ensure Virgin Media has both. So with that, let's get into the results.
My first slide, I set out some key highlights. Financially, we continue to improve revenue trends with the second successive quarter of on-net consumer revenue growth. We're very pleased with this milestone. We demonstrated strong cost control with a 10% decrease in SG&A on Q4 '07 and we generated strong free cash flow of 357 million pounds for the year, up an impressive 41% year-on-year. We used a portion of this cash to pay down 300 million of bank debt in December following our successful bank amendment.
Operationally, we delivered strong sequential growth in ARPU which is also up on Q4 '07 of 42.30, RGUs are up 6% at a record 12.4 million and we had a good growth in broadband, TV, phone and contract mobile subs during the quarter. Churn is down again at 1.2% compared to 1.4% a year ago and triple play is up to a record of 56%.
We've also begun to implement the restructuring plans we announced at the Analyst Day in November to create a fully integrated customer focused organization and we're on track to deliver our targeted annual savings of over 120 million pounds by the end of 2012.
Our strategic priorities are to lead the next generation broadband market in speed and in quality and therefore value-added service to lead and redefine the mid-market TV experience through video-on-demand and to leverage our mobile proposition.