Virgin’s contract base overtakes prepay for the first time

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Contract customer base grew 26 per cent in 2011 to hit 1.52m subscribers, meaning Virgin now has more contract customers than prepay for the first time

Virgin Media increased its mobile contract customers by 26 per cent last year to 1.52 million – resulting in the MVNO having more contract customers than prepay for the first time in its history.

The company added 102,500 contract customers in Q4 2011 – almost double what it added in the same quarter a year ago – with 101,000 of them having a Virgin Media cable service.

However Virgin’s prepay customer base fell 19 per last year and it lost 700 of those customers in Q4 to leave that base at 1.5 million.

Full year revenue was £552.9 million last year, down 1.3 per cent on 2010, which Virgin said was due to strong contract revenue growth being offset by prepay revenue decline and regulatory changes to mobile termination rates (MTRs) that occurred last April.

Contract service revenue increased 16.4 per cent in 2011 to £367 million but prepay service revenue fell 22.1 per cent to £172.8 million.

Virgin said the MTR change reduced the amount of inbound mobile revenue it received by around £21 million for the full year compared to 2010. It added mobile revenue would have increased by around 2.5 per cent, excluding the regulatory factor.

Mobile revenue fell 4.1 per cent to £142.2 million in Q4 2011. Virgin said this was due to the regulated change in MTRs that reduced its inbound mobile revenue by approximately £7 million and declines in prepay service revenue, partially offset by growth in its contract base.

Contract service revenue was up 11.7 per cent to £97.6 million in the three month period, partially offset by the impact of MTRs, but prepay service revenue fell 19.3 per cent to £41.4 million, mainly due to a reduction in subscribers.

By the end of last year, Virgin had around 728,500 households with its cable product, or 15 per cent of its customer base with at least one Virgin Mobile contract, up 33 per cent since the start of the year. These homes had around 1.03 million mobile contracts.

Virgin estimated it has a further 211,000 cable households with at least one of its prepay phones, meaning total mobile penetration of the cable base is around 20 per cent, which it said leaves a significant growth opportunity to cross-sell it’s other services to the remaining 80 per cent.

Virgin increased its quad-play penetration, where a household takes all three of its cable products and at least one mobile phone service, by 14.5 per cent compared to 12.2 per cent at the start of 2011.

It now has around 697,000 quad-play customers, which is around 113,000 net customers or 19 per cent during last year.

Virgin Media CEO Neil Berkett (pictured) said: “In a fast-changing industry and an uncertain economic environment, our 2011 results demonstrate the underlying resilience of Virgin Media’s business model, with modest revenue growth driving robust OCF and record free cash flow.

“We are successfully building contract mobile sales into cable homes and Virgin Media Business ended the year strongly as an increasingly important and growing contributor to the group.”

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