Accelerating ARPU from Virgin Media boosts Liberty Global results
Adding an extra 105,300 RGU during the last quarter for Virgin Media is a positive move and for those not used to investor speak an RGU is a Revenue Generating Unit. Breaking things down the broadband additions in the quarter were 36,400 and we suspect a large number of there were the result of the Project Lightning expansion which officially added an extra 109,000 premises in the quarter. The net additions in the UK is higher due to the bundling effect i.e. people adding extra elements such as TV or mobile to their account.
The continued operating and financial momentum at Virgin Media helped fuel our Q3 results. With respect to our U.K. subscriber growth, we generated over 100,000 net additions, which represents a record third quarter performance. This achievement was supported by strong volume growth in both our Project Lightning and legacy footprints. From a product perspective, we continue to reap the benefits of our next-generation V6 set-top box and Hub 3 WiFi router deployments, as we saw meaningful year-over-year improvement in churn. We also announced a 4.5% average U.K. customer price rise, which should underpin our results in the coming quarters. In our other markets, we reported mixed results as Telenet delivered 8.4% rebased OCF growth in the quarter, driven by synergy realization, while we posted a 9% rebased OCF contraction in Switzerland.Liberty Global CEO Mike Fries
The Project Lightning expansion is running at a decent pace and with the RFOG component is currently a key part of the growing FTTP footprint in the UK. Where we disagree with the CEO is the positive attitude towards the SuperHub 3, this device has known Intel Puma chipset bugs, in theory fixed by firmware but that does seem to have been pushed to all customers and even then the router does odd things like stop responding to pings (result plenty of Virgin customers thinking our BQM tool has broken). The big kicker is highlighting an inflation busting price rise in the UK, now we know Virgin Media is not the only provider to raise its prices in the last year but the market itself is rapidly moving to a position of no in contract price rises and if Virgin Media misses that boat it might find retaining customers even harder, particularly in areas where competitors can offer speeds that are reasonable.
Our tracking of the Virgin Media footprint showed the operator growing its footprint by 192,000 premises passed in the quarter, the reason it is higher than the official figure is that in the quarter we improved our detection of the network expansion and therefore are catching up on what we missed in some previous quarters.
Hopefully Liberty Global will not see the UK as a market sector which it can use to prop up other markets i.e. more price rises but actually reward the UK with new broadband hardware and a sooner rather than later deployment of DOCSIS 3.1. DOCSIS 3.1 allows for a big change in speeds with Gigabit products and if backed by investment in the core network which often seems to be the Achilles heel has the potential to fight off any new FTTP market entrants.