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Virgin Media (VMED)
Q1 2013 Earnings Call
April 24, 2013 8:00 am ET
Neil A. Berkett - Chief Executive Officer, Chief Executive Officer of Virgin Media Investment Holdings Limited and Director
Paul Sidney - Crédit Suisse AG, Research Division
Timothy Boddy - Goldman Sachs Group Inc., Research Division
Bryan D. Kraft - Evercore Partners Inc., Research Division
David-A Wright - Deutsche Bank AG, Research Division
Nick Lyall - UBS Investment Bank, Research Division
Adam M. Rumley - HSBC, Research Division
Stephen Paul Malcolm - Arete Research Services LLP
Laurie Davison - Deutsche Bank AG, Research Division
Matthew J. Harrigan - Wunderlich Securities Inc., Research Division
Previous Statements by VMED
» Virgin Media's CEO Discusses Q3 2012 Results - Earnings Call Transcript
» Virgin Media's CEO Discusses Q2 2012 Results - Earnings Call Transcript
» Virgin Media's CEO Discusses Q1 2012 Results - Earnings Call Transcript
Thank you. Good morning or afternoon to you all, and welcome to Virgin Media's Q1 results call.
Today's call may make reference to the proposed transaction with Liberty Global, which we announced in February. Please, may I direct you to the statements on Slide 2, which tells you where you can get more information about the proposed transaction and which should be read in conjunction with any statements made on today's call about the proposed transaction.
In addition, please let me draw your attention to the Safe Harbor statement on Slide 3, where we set our cautionary disclosures, which should be read with any forward-looking statements we make today.
I'll also point out that we will be mentioning certain non-GAAP measures today. The required disclosures with respect to these can be found in the slide appendixes. And now, I'll turn you over to Neil Berkett.
Neil A. Berkett
Thanks, Richard, and thanks for joining the call, everybody. As in all probability, this will be our last set of results as an independent company. We're deliberately, and I think quite appropriately, going to give a fairly short actual presentation. I'm going to run through about 6 slides and then Eamonn will join me for the Q&A.
So we've had a good start to the year with accelerated revenue growth and improved churn and very strong free cash flow growth. Importantly, we put through a 5% price increase without any noticeable adverse effects.
I'll quickly run through the highlights. Firstly, we delivered revenue growth of 3.6%, underpinned by a 7% cable revenue growth. ARPU grew 5.2%, customer growth was 9,000 and were supported by lower churn. Business revenue growth remains lumpy and was negative in the quarter, but we signed a number of large new backhaul deals, which gives us good confidence going forward, more on that in the moment.
OCF grew 5.8% to GBP 399 million, but this was affected by GBP 8 million of cost relating to the announced merger with Liberty Global. OCF for these merger-related costs was GBP 406 million, or up 8%. Free cash flow was up 54% to GBP 135 million. If you baked the $8 million merger cost, again, it would've been GBP 142 million, or up 63%.
So my next slide is a repeat of the slide we presented for the last few quarters, updated, obviously for Q1. We continue to generate sustainable modest revenue growth through multiple leaders. In respect to customer growth, our base has grown by 1.6% in the last 12 months, reduced churn remains the main driver. In fact, it was down year-on-year for the sixth quarter in a row to 1.1%.
From a pricing point of view, the most important activity in the quarter, was in fact the 5% price increase we put through in February. For the second year in a row, I was pleased it has landed very well and did not stimulate churn. This is because increased product differentiation is underpinning our ability to increase price. We've been doubling broadband speeds for over 4 million broadband customers. TiVo is transforming the digital entertainment experience and more cable customers are taking a great value mobile service from us.
Moving on to TMX. This continues to improve across the product set. Over 40% of broadband gross ads takes 60 meg or above, an incredible statistic. Our pay TV mix improved also driven by TiVo, which is now up to 40% penetration. In respect to product cross sell, we've improved triple play to 65% and quad-play to 16%, adding 37,000 triple play and 18,000 quad-play customers. Mobile cross-sell into the cable base continues to driver contract growth, with subscribers up 10% year-on-year. With respect to Business Data, we've signed 3 major backhaul deals, which will underpin revenue growth going forward.
Overall, our multiple revenue drivers give us continued confidence that we can continue to drive sustainable revenue growth.
We continue to lead the market in superfast broadband to attractively priced bundles. Our speed doubling program is driving this further, leveraging off the technical and economic supremacy of our network. Over 85% of the network has now been upgraded for doubled speeds with the remainder on track to complete by the middle of the year. We're driving a fundamental shift in mix. We're growing the superfast broadband base that is 30 meg and above, by 338,000 this quarter. This is underpinning growth in our total broadband base, which is up 37,000. Again, this really demonstrates strong demand for high speeds and the success of our collections. This is not a niche market, as I've said. It's a mass market.