VMO2 Q3 revs slip back but fixed-line customer growth returns

Even though the UK communications provider saw revenues and EBITDA fall on a year-on-year basis, Virgin Media O2 (VMO2) said results for its third financial quarter of 2024 have shown green shoots in the form of stable combined consumer fixed and mobile revenue, and continued commercial momentum in fibre footprint expansion and 5G connectivity roll-out.

In the results for the three months ended 30 September 2024, VMO2 posted total revenue of £2.702bn, a 2.4% decrease year-on-year, as revenue excluding the impact of construction of its Nexfibre infrastructure decreased by 4.5%. Total mobile revenue decreased 4.2% to £1.442bn, an improvement in momentum when compared with the previous three-month period, the reduction primarily driven by low-margin handset revenue, which decreased 13.7%.

Consumer fixed revenue increased 2.5% on an annual basis to £859.6m, supported by growth in ARPU of 2.2% year-over-year. B2B fixed revenue decreased 13.4% yearly to £106.7m, primarily due to a reduced level of long-term leases being entered into versus the comparative period.

Other revenue decreased 2.9% to £293.9m, with an increase in Nexfibre construction revenue more than offset by the year-over-year impact of approximately £38m of revenue recognised from a change in terms of a related-party contract in Q3 2023.

Adjusted EBITDA Q3 decreased 4.1% year-on-year to £1.002bn, as adjusted EBITDA excluding Nexfibre construction also decreased 4.1%, prior to £7.7m of opex cost to company. This decrease was attributable to the approximately £38m impact of a related-party contract change in terms during Q3 2023, and targeted investments in marketing on the growing Nexfibre network and digital efficiency programmes.

A related-party contract change in Q1 2024 also impacted growth, with approximately £14.1m of CPE hardware and essential software costs capitalised in the quarter. Q3 2024 adjusted EBITDA margin was 37.1%, compared with 37.7% in Q3 2023, reflecting an increased level of low-margin Nexfibre construction revenue.

Drilling deeper into the highlights for the quarter, VMO2 pointed to the expansion of Nexfibre footprint and improved momentum in the mobile contract base, with a reduction of 15,300 in Q3, supported by monthly O2 contract churn reduction to 1.1%.

Fibre roll-out into new areas was said to have continued at pace as build, primarily on behalf of Nexfibre, reached 281,100 new premises in Q3 2024, with a 44.2% increase in build rate in the first nine months of 2024 compared with 2023. This includes the transfer of the first Upp premises from Virgin Media O2 to Nexfibre following the acquisition of the altnet in 2023, and the completion of integration work, with the majority of the 175,000 acquired premises still to be transferred.

As well as continued momentum in its fibre footprint expansion, the company also noted 5G connectivity roll-out, with total year-to-date investment of over £1.5bn and total serviceable homes standing at 17.8 million.

Assessing the company’s performance in the quarter, VMO2 CEO Lutz Schüler said the provider showed that it has continued to make progress against its core strategy as it invests in the foundations for future growth.

“We delivered on both volume and value in consumer fixed, with a return to customer growth coupled with an increase in fixed-line ARPU,” he said. “In mobile, we saw a quarterly trend improvement in key metrics, supported by a reduction in O2 churn during a summer of key campaigns for our loyalty programme priority and inclusive EU roaming.

“Our 5G and fibre roll-out continues at pace, and we have invested more than £1.5bn so far this year as we focus on delivering a great customer experience with fast, reliable connectivity in more areas, increased loyalty benefits and improvements in our customer service performance,” said Schüler.