Virgin Media puts fibre at heart of expansion plans

Virgin Media now has 4.21 million broadband customers

Virgin Media has attributed a strong second-quarter performance to its fibre network, which the company believes gives it a "substantial" strategic advantage.

Neil Berkett, chief executive at Virgin Media, said at an earning release conference that the ISP's network "cannot be replicated and will not be replicated, certainly not in my tenure".

He also urged the Advertising Standards Authority to follow Ofcom's independent review of broadband speeds in investigating competitors that advertise speeds they struggle to deliver.

"If the Financial Services Authority allowed this to happen we would be screaming the roof down, but we can allow inferior broadband suppliers to lie to the marketplace," he said.

Virgin Media added 28,100 broadband customers during the second quarter to take its total base to 4.21 million.

The company said that more than 650,000 customers now subscribe to its 20Mbit/s and 50Mbit/s services, a 43 per cent year-on-year increase. Some 74,000 of these have selected the top-speed 50Mbit/s service, a 28 per cent increase on the previous quarter.

The company has heavily promoted its offerings, increasing sales and marketing spend from £30m to £40m in a year, and increasing its retail presence from 68 to 92 stores with a further 25 planned to open by year end.

Beckett claimed that the resulting increase in brand awareness had made the company the "second most powerful brand in media in the UK".

Speaking at the same event, Eamonn O'Hare, Virgin Media chief financial officer, announced an immediate £125m accelerated share buy-back programme which will form part of a repurchase of £377m worth of common stock over the next year to return to shareholders.

Defending the choice of a buy-back over a dividend strategy, O'Hare argued that it will send strong signals to the market that the company feels its shares are "undervalued" and will "underscore its growth credentials".

Turning to the future, Berkett firmly positioned Virgin Media's growth strategy with the incorporation of TiVo within its new generation of set-top boxes, which he said will "transform the UK TV market".

"I firmly believe this will create a formula for growth in 2011 similar to that we've seen in 2010," he said.

Berkett also indicated that high-definition will form an "increasingly important part" of Virgin Media's portfolio, verified by the company's increasing its HD offering from one channel to 26 in the past 12 months.

Speaking of future infrastructure developments, Berkett said that Virgin Media had increased its fibre investment to 13,000 new homes at a cost of £200 to £300 per home.

Berkett said that, while there is a strategy to continue this expansion, the company is also looking into new ways to reach homes where the cost of extending its underground cabling would not be feasible.

He urged the government and Ofcom to move from "rhetoric to practicality" in opening the infrastructure of incumbents, but talked up a trial scheduled at the end of the year to run broadband fibre between aerial poles, claiming that Virgin Media is "open to explore a range of methods".

Virgin Media has the "incentive for expansion" as its comprehensive product range gives it a "100 per cent opportunity with every new home", compared to BT which will have only a "70 to 40 per cent opportunity", Berkett said.

The firm "does not fear" BT's recent £150m investment in VDSL fibre as Berkett believes it to be limited to 24Mbit/s.