Virgin Media O2 shows return to revenue growth and improved profitability

Twelve months after Telefónica and Virgin Media announced they were combining their respective mobile and fixed assets in the UK, Virgin Media O2 has announced financial results that show the company’s best full-quarter growth, with a return to revenue growth and improved profitability driven by price rises and synergies.

For the quarter ended 30 June 2022, Virgin Media O2 reported transaction adjusted revenue of £2.554bn, inching up 0.2% on a yearly basis, driven by fixed and mobile service price rises. Mobile revenue was up 2.2% year-on-year to £1.427bn with improvements in both handset and service. Fixed revenue decreased by 3.0% year-on-year to £1.01bn, primarily driven by B2B, where there was a high level of installation revenue within Virgin Media Business Wholesale in Q2 2021. Other revenue rose by 4.9% to £121.3m.

Transaction adjusted Ebitda (earnings before interest, taxes, depreciation and amortization) was up £972m, an increase of 4.0% compared with the same period a year earlier, excluding £14.8m of opex CTC but representing the best full-quarter growth rate since Virgin Media O2 was formed. This was assisted by the flow through of price rises, as well as cost efficiencies and the realisation of synergies, but partially offset by increased energy costs.

Without taking into consideration capex, transaction adjusted Ebitda would have been £458m, representing a surge of 153% year-on-year. Net profit was £78m, increasing by 331% compared with Q2 2021.

By the end of the quarter, Virgin Media O2’s total fixed-line (cable) customer base stood at 5.8 million with additions of 8,000 in the quarter, and it added 16,000 broadband connections, with an average broadband speed of 247Mbps – five times faster than the national average.

The company’s gigabit network expansion build programme, Project Lightning, increased to 114,000 premises, up from 101,000 premises added in Q1 2022 and 89,000 in Q2 2021. The cumulative Lightning footprint is now 2.9 million and the company said it was on track to add more than 500,000 Lightning premises in 2022, with speeds of 1.1Gbps offered across its entire footprint of 15.9 million premises.

The FTTP upgrade of the existing network is starting to ramp up after completion of trials in Q1. The goal is to roll out full fibre across the fixed network at a cost of £100 per home, with completion in 2028.

Meanwhile, mobile contract additions took the company’s total mobile contract base to 16 million, and Virgin Media O2’s total retail mobile connections – contract, prepaid and IoT – now stand at 33 million. 5G was available in more than 600 towns and cities at the end of the quarter and the company said it was on track to reach 50% of the UK population in 2023, leveraging O2’s leading position in low-band spectrum. It also upgraded 4G capacity in 154,000 postcodes during Q2.

“In Q2, we’ve grown our fixed and mobile customer base once again, as fast and reliable connectivity remains a top priority for consumers and businesses,” said Virgin Media O2 CEO Lutz Schüler. “We’ve seen an improved revenue performance alongside our best quarterly profitability growth since we merged, putting us in solid shape to meet our full-year guidance

“It’s one year on since Virgin Media O2 was born and, while we’ve got much more to do, we came out of the gate running and achieved a huge amount in our first year as a joint business. As we navigate a tougher economic environment and provide our customers with great value and targeted support, we have clarity and focus on three growth waves that will drive sustained commercial momentum.

“Firstly, our integration is firmly on track, our synergies are being realised and we’re innovating at pace with convergence at our core; secondly, we’re moving forward our digitisation plans to improve our existing operations and build future foundations; and thirdly, we’re investing heavily to expand and upgrade our fibre and 5G networks to bring top-class connectivity to more of the country.”