Virgin Media Profit Gains on High-Speed Internet Subscribers

Virgin Media Inc., the U.K. pay-TV provider being bought by John Malone’s Liberty Global Inc., said first-quarter operating profit rose 7.9 percent as it added more high-speed Internet customers.

Earnings before interest, taxes, depreciation and amortization and other one-time charges was 406 million pounds ($619 million) while revenue gained 3.6 percent to 1.04 billion pounds, the Hook, England-based company said in a statement. The takeover by Liberty Global is expected to be final in the second quarter and today’s earnings will probably be the last at Virgin Media. The European Union approved the deal last week and it’s now being weighed by U.S. regulators.

Liberty Global, controlled by billionaire Malone, is paying $16 billion for Virgin Media to expand in Europe’s biggest cable-TV market. The company competes against British Sky Broadcasting Group Plc, the U.K.’s biggest pay-television company, as well as streaming services such as Netflix Inc.

“We have had a good start to the year with accelerated revenue growth, improved churn and strong free cash flow growth,” Chief Executive Officer Neil Berkett said in the statement. “This positive momentum in the business positions us well for our planned merger with Liberty Global.”

The shares rose as much as 1.6 percent to 3,246 pence. Virgin Media was up 0.4 percent at 8:46 a.m. in London trading.

Bundled Packages

Virgin Media’s “superfast broadband” service customers rose by 337,900 to 2.5 million homes, representing 58 percent of its customers.

Operating profit at Virgin Media was lifted by a 5.2 percent increase in average revenue per user during the first quarter, which now stands at 49.38 pounds. Virgin Media added 35,100 new mobile phone contracts during the period, bringing that client base to 1.7 million. Customer turnover fell to 1.1 percent in the period.

Sixty-five percent of Virgin Media customers are considered so-called triple-play users, which means they subscribe to cable TV, Internet and fixed-line telephony. “Quad play,” which adds mobile-phone service, accounts for 16 percent of its clients.

The company isn’t planning to create original content like TV peers BSkyB or ITV Plc, and is in discussions to add streaming services such as Netflix Inc. to its TV offering, Berkett said in a phone interview today.

Berkett, who has served as Virgin Media’s chief since 2008, will step down once Liberty Global takes over at the end of the second quarter, he said. He referred questions on his successor to Liberty Global, which is searching for someone to lead Virgin Media.

Berkett stands to receive $19.6 million from cash and stock in severance pay, according to a Liberty Global filing in March. Other options and rewards from Berkett’s long-term incentive plan amount to $67.2 million.

Under Berkett, Virgin Media’s share price has tripled. He took the company to its first annual profit in 2011 by concentrating on fast Web and basic TV customers while stabilizing debt.

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