Tags: Virgin | Media | cable | VMED

Virgin Media Offers Alternative Cable Play

By    |   Tuesday, 18 Oct 2011 11:05 AM

Virgin Media (VMED) provides broadband and mobile phone services to more than 4 million customers in the United Kingdom. The company's stock is dual listed, trading on both the Nasdaq and London Stock Exchange. For investors, this stock may be an alternative play to the U.S. cable companies.

Virgin Media offers cable TV, broadband Internet, and telephone services through a fiber optic network which covers most of the U.K. The company also sells mobile telephone services through its Virgin Mobile brand. The business segment of the company's revenues provides voice and data services to commercial customers.

Recent technical innovations include offering ultra-fast broadband Internet with speeds up to 100 MB/s and a streaming plus on-demand video service in partnership with TiVo (TIVO).

The fiercely competitive U.K. cable and broadband environment has Virgin Media focused on cross-selling to existing customers and signing up more high-value customers. In the second quarter the company reported a net loss of 36,000 cable customers. Yet in the same quarter it was able to add 25,000 customers who take all four telecom services. These customers provide highest profitability and are less likely to jump to a competitor.

Leveraging revenues

The Virgin Media financial model can leverage a moderate amount of revenue growth to a higher level of bottom-line profits. For example, in the 2011 second quarter, revenues increased by 2.2 percent year-over-year.

On this revenue growth, operating cash flow increased by a factor of three to 6.6 percent and free cash flow, roughly equating to net income, grew by 12.7 percent. The catalysts for this leveraging are cross-selling more products to existing customers and careful management of the company's long term debt.

Recently, Nomura Securities analysts upgraded VMED to buy from neutral with a target price 30 percent above the current share price level.

The company next reports on Oct. 27.

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Virgin Media (VMED) provides broadband and mobile phone services to more than 4 million customers in the United Kingdom. The company's stock is dual listed, trading on both the Nasdaq and London Stock Exchange. For investors, this stock may be an alternative play to the...
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2011-05-18
Tuesday, 18 Oct 2011 11:05 AM
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