Virgin Media beats underlying profit expectations

Thu Aug 7, 2008 3:47am EDT

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LONDON, Aug 7 (Reuters) - British cable group Virgin Media beat market expectations for underlying profit in the second quarter despite losing 19,500 customers, and reiterated its focus was increasing the quality of its customer base.

Underlying operating profit rose to 333 million pounds ($651 million) from 315 million, Virgin Media said on Thursday, beating Reuters consensus of 321 million pounds. Sales of 990.5 million pounds were broadly in line.

Nasdaq-listed Virgin Media, which offers TV, broadband and fixed and mobile phone services, took a non-cash goodwill impairment charge of 366 million pounds for its mobile business, resulting in a US GAAP operating loss of 333 million pounds.

It bought the mobile unit, a reseller business with a high proportion of prepay customers, for just under 1 billion pounds two years ago.

"In the face of a tougher national economic environment... we continue to focus on improving our operational execution and driving unnecessary cost and inefficiencies out of the business," Chief Executive Neil Berkett said in a statement.

The number of net customers lost in the second quarter, typically the weakest, compared with 70,300 a year earlier. Churn -- the proportion of customers cancelling services -- fell to 1.3 percent from 1.8 percent in the year-ago period.

Average revenue per user (ARPU) for cable customers was 41.63 pounds per month, down from 42.16 pounds in the second quarter of 2007.

Virgin Media said it expected to add more customers in the second half than in the first, and to continue to reduce churn.

Virgin Media trades at 17.7 times forecast 2009 earnings, according to Reuters Estimates, cheaper than U.S. peer Comcast , at 19.9 times, but significantly more expensive than UK satellite TV group BSkyB , at 11.4 times. (Reporting by Georgina Prodhan; Editing by Erica Billingham)