Virgin Media O2: Robust financials, but dipping subscribers
VMO2 reported solid financials in Q1, with revenue and EBITDA growth both improving and both (just) ahead of full year guidance.
Subscriber momentum however was poor across fixed and mobile, despite customer service improving, with broadband in particular likely to get worse as network buildout slows.
Meeting full year guidance is still achievable, but will likely require a significant altnet slowdown sooner rather than later in the year.
Related reports
The ‘big 4’ ISPs’ combined revenue remained in decline in Q4 2024 at -0.4%, partly due to a BT accounting quirk but mainly due to altnets gaining share
ARPU growth of 2% is roughly compensating for subscriber declines of 2%, but this ARPU growth is likely to weaken in 2025 as various boosts drop out
A recovery will come as the altnets slow in H2 2025 (if not before) due to their restrained expansion, which cannot come soon enough for the big ISPs
Virgin Media O2: Aiming for growth
24 February 2025VMO2 had another mixed quarter to end a difficult 2024, with revenue growth improving but EBITDA growth falling, and other metrics mixed at best.
The company hopes to put this behind it with guidance for both revenue and EBITDA growth in 2025, a tough ask given current momentum.
Ultimately achieving or exceeding this may depend on altnet pressure receding, which we expect it to do, but perhaps more towards the end of the year than the beginning.
VMO2/TTG merger talks (again) : Still tricky
12 February 2024According to press reports, VMO2 is in early stage discussions over buying TalkTalk’s consumer retail broadband business, but not its wholesale business, which may leave the latter in limbo.
There is strong industrial logic to the deal, with a sub-brand useful, and significant synergies from moving the TalkTalk base to VMO2’s network, with the latter gain at Openreach’s expense.
There would be major regulatory hurdles for the deal, with concerns on both a retail and wholesale level, and particularly the future of the altnets, with any deal likely having to protect this.
VMO2 and CityFibre merger talks: A tough sell
20 March 2023VMO2 and CityFibre are reportedly holding merger talks, which would bring together by far the two largest fibre builders competing with Openreach.
On a conventional altnet acquisition assessment, CityFibre is an attractive target given its scale, but a very expensive one at a full price given the degree of overlap.
The acquisition might still be attractive given the opportunity to take out a wholesale competitor but, for this same reason, regulatory clearance would be very tough.
With the O2/Virgin Media merger now approved, VodafoneZiggo in the Netherlands may hold clues to their likely approach to the market although their starting point is not quite the same and some lessons may have been learned.
We remain sceptical of the merits of discount-led convergence strategies. The pandemic, however, has eased the route to cross-selling and strengthened the case for convergent technologies.
Virgin Media’s network strategy will be key with significant risks from wholesaling their cable network and from expanding their footprint.
The ‘big 4’ ISPs’ combined revenue remained in decline in Q4 2024 at -0.4%, partly due to a BT accounting quirk but mainly due to altnets gaining share
ARPU growth of 2% is roughly compensating for subscriber declines of 2%, but this ARPU growth is likely to weaken in 2025 as various boosts drop out
A recovery will come as the altnets slow in H2 2025 (if not before) due to their restrained expansion, which cannot come soon enough for the big ISPsVirgin Media O2: Aiming for growth
24 February 2025VMO2 had another mixed quarter to end a difficult 2024, with revenue growth improving but EBITDA growth falling, and other metrics mixed at best.
The company hopes to put this behind it with guidance for both revenue and EBITDA growth in 2025, a tough ask given current momentum.
Ultimately achieving or exceeding this may depend on altnet pressure receding, which we expect it to do, but perhaps more towards the end of the year than the beginning.
VMO2/TTG merger talks (again) : Still tricky
12 February 2024According to press reports, VMO2 is in early stage discussions over buying TalkTalk’s consumer retail broadband business, but not its wholesale business, which may leave the latter in limbo.
There is strong industrial logic to the deal, with a sub-brand useful, and significant synergies from moving the TalkTalk base to VMO2’s network, with the latter gain at Openreach’s expense.
There would be major regulatory hurdles for the deal, with concerns on both a retail and wholesale level, and particularly the future of the altnets, with any deal likely having to protect this.
VMO2 and CityFibre merger talks: A tough sell
20 March 2023VMO2 and CityFibre are reportedly holding merger talks, which would bring together by far the two largest fibre builders competing with Openreach.
On a conventional altnet acquisition assessment, CityFibre is an attractive target given its scale, but a very expensive one at a full price given the degree of overlap.
The acquisition might still be attractive given the opportunity to take out a wholesale competitor but, for this same reason, regulatory clearance would be very tough.
With the O2/Virgin Media merger now approved, VodafoneZiggo in the Netherlands may hold clues to their likely approach to the market although their starting point is not quite the same and some lessons may have been learned.
We remain sceptical of the merits of discount-led convergence strategies. The pandemic, however, has eased the route to cross-selling and strengthened the case for convergent technologies.
Virgin Media’s network strategy will be key with significant risks from wholesaling their cable network and from expanding their footprint.