Virgin Media O2 nears 2m Volt customers
February 16, 2024
Virgin Media O2 has reported that 2023 transaction adjusted revenue increased 5.2 per cent year-on-year to £10.9 billion (€10.1bn) excluding the year-on-year impact of nexfibre construction. Total mobile revenue increased by 0.6 per cent to £5.9 billion as consistent service revenue growth was partially offset by low-margin handset revenue performance which weakened through the year.
Consumer fixed revenue decreased 2.3 per cent to £3.3 billion due to spend optimisation on mid-tier TV and home phone attributed to household budgets being squeezed by the increased cost-of-living, but partially offset by a growing price rise benefit through the year.
B2B fixed revenue decreased 2.4 per cent to £554 million due to pricing headwinds. Other revenue increased 120 per cent to £1,094.7 million, driven by nexfibre construction revenue and approximately £38 million of revenue from a change in terms of a related-party contract in Q3.
The Liberty Global-owned telco reported Q4 transaction adjusted revenue increased 3.7 per cent year-on-year to £2,8 billion. Total mobile revenue decreased by 5.4 per cent to £1.5 billion, with growth in service revenue more than offset by a 20 per cent decrease in handset revenue. Consumer fixed revenue was flat year-on-year at £831.8 million, supported by the flow through of price rise benefit offsetting household spend optimisation. B2B fixed revenue increased 13.1 per cent to £163.7 million driven by a significant level of revenue related to long-term leases of a portion of the fixed network. Other revenue increased 115.6 per cent to £315.7 million driven by increased nexfibre construction revenue.
Lutz Schüler, CEO of Virgin Media O2, said: “We ended the year with stable revenues in line with our revised guidance at Q3, and achieved the low end of our mid-single-digit Transaction Adjusted EBITDA growth guidance through accelerated synergy execution which offset the impacts of consumer spend optimisation.”
“Operationally, we invested another £2 billion in our networks and services, with 2023 being the fastest year of fibre rollout as our fibre footprint reached over 4 million premises. In aggregate, our fully gigabit serviceable footprint now reaches over half of all UK homes, and our 5G network covers half the UK population. We also continued trading momentum with mobile and fixed customer growth, supported by sustained customer-first initiatives like inclusive EU roaming and our O2 Priority loyalty scheme. Looking ahead, the 2024 outlook will be impacted by incremental investment in key initiatives to drive future growth, including increased marketing across our rapidly expanding fixed footprint, new commercial initiatives and wider digital and IT efficiency programmes. We remain focused on delivering against our core strategy and these key investments will help us to lay down strong foundations for future success,” added Schüler.
Continued subscriber growth across fixed and mobile
The fixed customer base grew by 31,300 in 2023, with 2,600 net additions in Q4. This was driven by broadband with 63,800 net additions in the full year, including 9,500 in Q4.
Contract mobile net additions were 46,600 in 2023, with a 19,000 gain in Q4. The total mobile base grew to 44.9 million in full year 2023, with 211,200 net additions supported by growth in contract and IoT, partially offset by wholesale and prepaid.
Virgin Media O2’s converged consumer proposition, Volt, ended the year with 1.9 million customers taking a bundle. Volt customers show increased loyalty and satisfaction supported by benefits, including a broadband speed boost and double mobile data.
Upgrading the UK’s digital infrastructure
Virgin Media O2 rolled out fibre to new areas faster than ever before in 2023, delivering 833,100 additional serviceable premises, with the majority of these premises forming part of the nexfibre FTTH network. The company’s gigabit serviceable footprint reached the milestone of 17 million homes at the end of 2023, while the combined FTTH footprint stood at over 4 million homes, with fibre rollout expected to further accelerate in 2024. In mobile, the target of 50 per cent 5G outdoor UK population coverage was reached in Q4.
2024 guidance
The company expects:
• Stable to declining revenue and a low to mid-single-digit decline in Adjusted EBITDA, both excluding the impact of nexfibre construction (which is expected to contribute around 2 percentage points of total revenue growth)
• P&E additions of £2 billion to £2.2 billion, with opex and capex CTC of less than £150 million
• Cash distributions to shareholders of around £850 million supported by proceeds of the minority sale of CTIL in Q3 2023 and around £500 million of Adjusted Free Cash Flow. Targeting being in line with the 4x to 5x leverage range in the medium term 2024 Adjusted EBITDA impacted by investment to support medium term growth drivers:
• As nexfibre fibre rollout accelerates at pace in 2024, Virgin Media O2 will scale sales to support penetration in nexfibre areas
• Marketing initiatives to support product launches in the year
• Digital and IT efficiency programmes to improve customer experience and drive efficiency savings Profitability growth supported by synergies