Virgin Media Third-Quarter Profit Rises on High-Speed Broadband Customers

Virgin Media Inc., the U.K.’s second-largest pay-television company, said third-quarter operating profit rose 11 percent as subscribers opted for its faster and more expensive broadband products.

Earnings before interest, taxes, depreciation, amortization and other charges in the three months ended September rose to 387.3 million pounds ($612.6 million), from an adjusted 349 million pounds, the Hook, England-based company said today in a statement. Sales climbed to 978 million pounds, slightly ahead of analysts’ estimates of 971 million pounds.

Subscribers are taking faster broadband speeds, which pushed up average cable revenue per user by 3.7 percent in the quarter. The company is preparing to start its 100 megabits- per-second broadband at the end of the year, and said it will complete the roll out by the middle of 2012.

“Virgin Media’s network quality advantage and improved customer experience have delivered another quarter of stronger than expected results,” said Goldman Sachs analysts including Tim Boddy in a note to clients. Virgin Media chose not to compete with its largest competitors “in the marketing battle,” they said.

The company’s marketing costs fell to 36.7 million pounds from 39.7 million pounds in the previous quarter. Rival BT Group Plc started showing British Sky Broadcasting Group Plc’s Sky Sports 1 and 2 through its television service in the period. Virgin already shows the channels in high-definition. BSkyB is the U.K.’s biggest pay-TV operator.

“You couldn’t turn a corner without seeing adverts” from competitors, said Chief Executive Officer Neil Berkett on a conference call with reporters. “There was so much capital that was wasted last quarter it was unbelievable.”

Virgin Media started a 375 million-pound share buyback program after it completed its refinancing program and said today it concluded the first part of the buyback. Virgin also entered into a hedging agreement to increase the conversion price of its convertible notes from $19.22 to $35.

To contact the reporter on this story: Jonathan Browning in London jbrowning9@bloomberg.net.

To contact the editor responsible for this story: Vidya Root at vroot@bloomberg.net.

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