Virgin Media results and new 5 year MNVO deal with Vodafone
The Q3 2019 results for Virgin Media who are part of the Liberty Global group are out and while in the UK and Ireland they made a gain of 5,000 broadband customers they lost some 50,000 video customers and 9,000 telephone customers.
Shedding voice customers is to be expected, particularly as a generation who have grown up with mobiles are now buying their first or second home and place no value on having a fixed line phone service. Shedding 50,000 video customers may be a sign though that the video streaming package market is eating into the traditional cable TV business. Comparing the broadband, telephone and video figures with the same quarter 12 months ago shows how things are changing. The short version is broadband killed the high street, but it may also kill the traditional big TV cable/satellite packages.
- Virgin Media broadband customers now 5,648,300 up 70,300 in the last 12 months
- Virgin Media video customers now 4,041,900 down 130,200 in the last 12 months
- Virgin Media telephone customers now 4,978,300 up 85,000 in the last 12 months
The longer term picture suggests the drop in telephone customers may be a blip, but there is the quirk that the best deals when joining Virgin Media for broadband are when you join with telephone and broadband so we suspect a good number in the new Project Lightning areas buy the dual play bundle.
The growth of broadband customers does need looking at with respect to the growth in the Virgin Media footprint which grew some 119,000 premises in the last quarter (i.e. another 0.4% of UK premises) and has been growing at a similar rate for some 11 quarters now. The footprint growth using Virgin Media figures for the last year is 495,000 premises and if all the growth in broadband customers was in the new areas this suggests take-up of 14%.
Project Lightning that is growing the footprint is a mixture of RFOG (i.e. FTTP) and traditional coax, the RFOG is invariably used in totally new areas, where as the coax is used where an existing network is simply being extended.
The future of Virgin Media took a bit of a leap on Wednesday when a new five year MNVO deal was announced with Vodafone. This deal replaces a BT Enterprise contract that has been in place since 2017 and is set to end in late 2021. The new deal runs until 2026.
While clearly a blow to the BT Group and the EE mobile brand i.e. loss of a major MNVO that they picked Vodafone is actually of little surprise when you look at the deals that have been happening in Europe where Liberty Global sold its cable operations in Germany, Hungary, Romania and the Czech Republic to Vodafone then it is clear that the two groups are talking a lot more than the average person will be aware of.
The future for Liberty Global is going to be interesting as while there are rumours of wholesale access to the Virgin Media network in the UK, the big question is when and how big will the rumoured Liberty Fibre FTTP roll-out be. Our understanding is Liberty Fibre would be a distinct operation from Virgin Media, but Virgin Media would be one of several big name retailers buying the service at a wholesale level. In short Liberty Fibre looks set to be Liberty Global version of Openreach and by building outside the existing Virgin Media footprint they may have opportunities to be more aggressive on pricing. One speculative idea is that there might be co-operation with CityFibre to not over build each other and therefore push the UK footprint to grow faster and make it less problematic for large retailers such as Vodafone to sell full fibre services on both networks.