Superfast broadband yields supersize profits at Virgin

Virgin Media closes 2011 with its first ever full-year profit as its broadband and TV packages plump up margins.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013

If imitation is the sincerest form of flattery, BSkyB will be blushing right about now. Virgin Media has followed the broadcasting giant’s strategy to a t, focussing on upselling to existing customers rather than chasing new ones. The result: £48.2m profit in the final quarter of 2011 and annual earnings of £76m.

Subscriptions to Virgin’s new TiVo TV service have been selling like hotcakes with 273,000 sign-ups in the fourth quarter – more than double the customer count in Q3. And 15,000 new cable customers have also joined the fold in the three months to December. But chief executive of Virgin Media Neil Berkett cites superfast broadband as the other key cash generator: ‘Demand for better broadband also continues to grow fast, with around half of new customers choosing superfast speeds,’ he says. Superfast is right: Virgin's high speed coaxial cables are managing to pump data at an average speed of between 47.7 and 49Mb.

Revenue for Q4 was up 2% to £1bn, just as forecasted, but analysts hadn’t spotted the  profit potential in their crystal balls. Operational cash flow and free cash flow are both up strongly, trouncing expectations.

‘In a fast-changing industry and an uncertain economic environment, our 2011 results demonstrate the underlying resilience of Virgin Media's business model,’ says gung-ho Berkett. ‘Our strategy of focusing on customers who want more from the digital world is paying off.’

Chairman Richard Branson will be pleased. These results suggest that his media firm could finally be Virgin on mainstream domination. And that's just the conclusion that the media mogul wants everyone to jump to. Why else publish his - private - company's good news at all?

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today