Virgin Media O2 boosts customers; Cornerstone deal
November 1, 2023
Virgin Media O2 has reported net additions across fixed up 32,500, broadband up 40,800, and mobile contracts up 50,000 in Q3. Fixed network rollout passes 500,000 in the quarter, with 250,800 additional homes
Transaction adjusted revenue increased 7.1 per cent to £2.7 billion (€3.1bn) – 1.3 per cent excluding the benefit of nexfibre construction in the current year. Growth in transaction adjusted EBITDA continued for another quarter at 5.6 per cent in Q3.
Virgin Media O2 said it expects to deliver stable revenue excluding nexfibre construction, as household spend optimisation continues to impact fixed and is deteriorating the outlook for low-margin handset revenues.
Lutz Schüler, CEO of Virgin Media O2, commented: “With wider economic pressures persisting, Q3 has remained a tough environment to navigate as some consumers tighten spend, notably across mid-tier TV, home phone and on low-margin handsets. However, notwithstanding these factors, Q3 has seen positives – the implementation of price increases across the second quarter have led to service revenue growth; we’ve returned to strong customer additions across the board; and our converged fixed-mobile proposition continues to perform well, with 1.75 million people now taking a Volt bundle.”
“We are continuing to invest in our products, services and networks to give our customers an even better experience. This has included bringing 5G connectivity to new areas and expanding our fixed network footprint faster than ever before to reach over half a million new fibre premises so far this year. We’ll continue to be opportunistic in the market where the economics and strategic logic stacks up as recently demonstrated through the successful acquisition of Upp, and the sale of a minority stake in our mobile tower joint venture Cornerstone. Despite external pressures, we remain firmly focused on delivering for our customers in line with our core strategy.”
Meanwhile Virgin Media O2 has reached an agreement to sell a 16.67 per cent minority stake in its mobile tower joint venture, Cornerstone Telecommunications Infrastructure Limited, to the UK-based infrastructure fund, GLIL Infrastructure.
Virgin Media O2 will receive approximately £360 million payable in cash at closing of the transaction, which represents a multiple of 18.7x on Cornerstone’s adjusted EBITDAaL for the year ended in March 2023, and will retain a 33.33 per cent stake in Cornerstone upon completion of the transaction.
The sale has been structured through a Virgin Media O2 holding company (HoldCO), which owns 50 per cent of the Cornerstone shares. After the transaction, GLIL will own 33.3 per cent of HoldCo and Virgin Media O2 the remaining 66.7 per cent. As the majority shareholder of HoldCo, Virgin Media O2 will continue co-controlling Cornerstone, together with Vantage Towers, and continue to proportionally consolidate Cornerstone in its financial accounts.
Schüler said: “Selling a minority stake in Cornerstone is a logical move for us. We are partially monetising our tower infrastructure, while retaining operational and strategic co-control in a key asset as we roll out 5G to more of the country and boost 4G connectivity. This deal aligns perfectly with our core infrastructure and capital allocation strategy which sees Virgin Media O2 continue to invest in the UK to expand and upgrade our next generation fixed and mobile footprints. As a trusted UK centric investor, GLIL is the best long-term partner for Virgin Media O2 at Cornerstone.”
Simon Davy, an Investment Director at GLIL, added: “GLIL is delighted to be partnering with Virgin Media O2, providing local capital to support the delivery of critical mobile infrastructure. We are attracted by Cornerstone’s position as the owner of the UK’s largest tower portfolio, which fits well within GLIL’s existing portfolio of high quality, core infrastructure assets.”