Virgin Media 2Q Net Loss Wider on Impairment Charge

LONDON -(Dow Jones)- U.K. television and telephony company Virgin Media, Thursday reported a higher than expected rise in second-quarter operating cash flow, but profits were dented by a goodwill impairment charge relating to the company's mobile segment.

The U.K.'s second largest pay-TV provider said operating cash flow for the period rose 5.7% to GBP333 million compared with GBP315.3 million in the same period last year, beating a company consensus of eight analysts that forecast operating cashflow of GBP323 million.

The company reported a second quarter net loss of GBP447.2 million compared with a net loss of GBP119 million a year earlier.

Revenue fell to GBP990.5 million from GBP995 million a year earlier.

"In the face of a tougher national economic environment our business has demonstrated good resilience," said chief executive Neil Berkett.

The non-cash impairment charge for the quarter for the mobile segment was GBP366.2 million, which Virgin Media said was part of its annual impairment review, and recognized declining market multiples for comparable companies in the mobile segment, including reduced long-term cash flow estimates.

Still, "the continued integration of the mobile product offerings with our broadband, television and telephony offerings will continue to increase customer loyalty and help reduce churn," it said.

Average monthly churn - the rate of subscriber turnover - was at 1.3%, compared with 1.8% in the same period last year.

The results "look decent" Goldman Sachs said in an investor note, while a London-based analyst who asked not to be named said they were "pretty solid".

"Churn rate is fine, additions are fine, the only thing is the write off," he said.

Berkett confirmed the company will launch a new service with a download speed of 50 megabits per second in the second half of the year.

Rival telecommunications company BT Group last month said it plans to invest GBP1.5 billion in rolling out a fiber based network to 10 million U.K. homes by 2012, increasing competition for Virgin Media down the line.

Virgin Media expects to see a bigger growth in additions in the second half of 2008 than in the first half, Berkett said in an interview with Dow Jones Newswires, and for product sales to remain steady in the third quarter.

On-network revenue generating unit additions were 82,800 in the second quarter, compared with 8,900 net disconnects in the second quarter last year, and net additions of 154,200 in the first quarter of this year.

On-network revenue generating units are products, including bundles.

Average revenue per user, or ARPU, from cable customers fell to GBP41.63 from GBP42.16, due mainly to lower fixed line telephony usage and a shift of existing customers to lower priced bundles.

Virgin Media, which is listed on the U.S. Nasdaq exchange, operates solely in the U.K. where it has approximately 4.8 million cable and high-speed Internet customers.

Berkett said Thursday that a listing in London was something the company had considered in the past, but that for tax reasons it would be very complicated and isn't something he can foresee happening in the near future.

Shares Wednesday closed up 0.62% at $11.41.

-By Erica Herrero-Martinez, Dow Jones Newswires; 44 20 7842 9353; erica.herrero-martinez@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 7th August 2008