Virgin Media's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Virgin Media (VMED)

Q2 2012 Earnings Call

July 24, 2012, 8:00 a.m. ET

Executives

Richard Williams – Investor Relations

Neil A. Berkett - CEO, CEO of Virgin Media Investment Holdings Limited and Director

Eamonn O'Hare - CFO and Director

Andrew M. Barron - COO

Analysts

Simon Weeden – Citigroup, Inc

John [Crease] – Memorial

Robert Grindle – Deutsche Bank AG

Carl Murdock-Smith - JP Morgan Chase & Co

Walter Fry – Merrill Lynch

Frank Knowles – New Street Research

Timothy Boddy - Goldman Sachs Group Inc.

Steve Martin – Areton Research

Nick Lyall - UBS Investment Bank

Bryan Kraft – Evercore Partners

Tom Egan – Cannacord

Matthew Harrigan – Wunderlich Securities

Presentation

Richard Williams

Good afternoon to you all. It's great to have your presence in London. Good morning to those listening in from the states. Welcome to our Q2 results.

We've got a presentation from Neil and Eammon. It should last about 35 to 40 minutes, and then we'll open with questions from the floor and from the phones.

Please may I ask that we draw your attention to this Safe Harbor statement on slide two where we set our cautionary discloser, which should be read with any forward-looking statements we make today. Also, we will be mentioning certain non-GAAP measures today. The record disclosures with respect to these can be found in appendices to the slides.

I forgot to introduce myself. I'm Richard Williams, Director of Investor Relations for those of you who don’t know me. And with that, I'll turn you over to Neil

Neil A. Berkett

Thanks, Richard, and welcome everybody here in London and for those that are on the phone or watching on the webcast.

I think we delivered in the second quarter another solid state of results. And in most aspects, I think I can say I'm very pleased. Clearly, we have a seasonally weak quarter in the second quarter in terms of net adds but there was a balance across the business metrics, both financial and operating that I think reflect our steady, but sure progress.

We saw improvements in both revenue and in terms of OCF growth for the quarter. And clearly, the quarter was marked by a significant consumer price increase and it has landed very well. We advised our consumer customers early. We advised them more transparently than we did last year. And as a consequence of that, we've seen the price increase land and reflected in terms of ARPU. But I think even more importantly, churn has improved for the third quarter in a row, down some 5% on churn for Q2 2011.

Clearly, I'm slightly disappointed with a net adds performance of a minus 15,000. But I must remember that we put through the price increase and the consumer environment remains challenging, both in terms of consumer confidence and the competitor's activity. While we're absolutely confident that we're executing well and have invested at the right time in terms of our product differentiation, we don’t expect the market to change anytime soon.

I spoke of balance. Business revenue continues to be a key driver for us, up some 10% representing 36% of group revenue growth and I'll talk more about that later.

The overall result was a 5% increase in terms of OCF after a flat first quarter, and free cash flow of $128 million, up 5% in name, and Eamonn will give the granularity of that in his presentation.

We remain confident that we're pulling the right levers for growth. And I think you can see examples and evidence of that in this quarter both by way of the price increase by clear tier upgrades and by business revenue performance. And I'm encouraged that our business remains robust.

This slide, I think we've now shown for three quarters in a row quite deliberately and updated it for the facts as they state at the end of the quarter. And the reason we've done that is we continue to generate modest sustainable revenue growth through multiple growth levers. And the revenue growth in the quarter is up 4.2% over Q2, 2011. And I've said, helps substantially both the cable price increases and business revenue growth.

In terms of customer growth, we saw the base grow in the last year, albeit a small net loss of customers, consumer customers, in what is a seasonally weak quarter for us.

Disconnects were down some 9,000 despite the price increase and gross adds were up 12,000.

In terms of pricing, of course price rise landed well and clearly has contributed to ARPU growth. But it's really important that we don’t look at our price implementation as price for pricing's sake. It is absolutely critical that we provide our customers value for money so they continue to see as they have clearly done in this quarter, we represent strong value for money in a challenging economic environment. And I'll talk more about that later.

And clearly, we've also seen in the last few weeks, our competitors start to raise their prices. I maintain the strategy that we employed of continuing to raise prices while providing value for money has been the right one and has generated returns.

Our tier mix is improving across the whole of the products here. And I think one of the highlights, and I'll talk about this later is despite the fact that we have been telling the world that we're doubling our Broadband speeds of the gross Broadband connections in the second quarter, 40% of those customers elected to take 60 mink and above.

PayTV mix continues to improve being driven by TiVo And 25% of our base, a million subscribers this week now have Virgin Media TiVo.

Read the rest of this transcript for free on seekingalpha.com

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