VIRGIN MEDIA showed why US billionaire John Malone is paying more than £15bn for the broadband provider yesterday, as it revealed a 14 per cent rise in operating profits.
The company said that a price rise at the end of last year, as well as customers taking up more expensive TiVo TV and high speed internet packages, had seen revenues rise 3.6 per cent year-on-year in the first quarter of the year. This was despite its customer base rising by just 1.6 per cent in the last 12 months.
Virgin Media has shifted its focus from signing up new broadband customers to encouraging current ones to buy additional TV and mobile services in recent months, which has enabled it to keep increasing revenues despite modest customer growth. Yesterday it said that 2.5m broadband customers – six in 10 – are paying premiums for higher download speeds, while 1.5m people have chosen the more expensive TiVo TV package.
In what is likely to be the last set of quarterly results before Virgin Media is bought by Malone’s cable giant Liberty Global, the company saw revenues reach £1.04bn, while operating profits were up from £131m to £150m. The firm’s pre-tax profits were £161.6m due to the positive effects of derivative instruments.
Liberty Global, controlled by media mogul Malone, announced it would acquire Virgin Media for $23.3bn (£15.3bn) in February, with the purchase expected to go through by the end of June.
The deal, one of the biggest since the financial crisis struck, will see Malone reignite his battle with Rupert Murdoch, whose News Corporation is the biggest shareholder in Virgin Media rival BSkyB. The two have a history of conflict, having battled for control of US media companies for years.
Virgin Media boss Neil Berkett, who will step down once the deal completes, said: “This positive momentum in the business positions us well for our planned merger.”