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Virgin Media O2 has cut its annual revenue guidance as consumers pull back on spending on new mobile phones and broadband packages amid a cost of living crunch.
The UK telecoms group said on Wednesday it expected revenue, adjusted in relation to its 2021 merger and excluding any impact from its fibre-building activities, to be “stable” instead of in a “growth” phase.
Virgin Media O2 maintained its outlook for “mid-single digit growth” for earnings before interest, taxes, depreciation and amortisation, also adjusted for the merger and excluding any fibre impact.
The company, jointly owned by Liberty Global and Spain’s Telefónica, said adjusted revenue rose 1 per cent to £2.8bn for the three months to September 30, in comparison with the same period last year.
Chief executive Lutz Schüler said the most recent quarter had been “a tough environment to navigate” and added that “some consumers tighten[ed] spend, notably across mid-tier TV, home phone and on low-margin handsets”.
The group said customers were holding on to mobile devices for longer and that its fixed-line services, which include broadband, TV and home phones, were also affected by changes in household spending.
Mobile revenue edged up 1 per cent to £1.5bn, although growth in service revenues supported by price rises was partially offset by a 5 per cent reduction in handset revenues.
Tighter household spending offset price increases of almost 14 per cent in its consumer fixed division, where revenue declined 1.5 per cent to £839mn.
Virgin Media O2 gained an additional 32,500 net fixed-services customers in the period while its number of contract mobile subscribers increased by a net 50,000.
Overall, Virgin Media O2’s third-quarter adjusted earnings before interest, taxes, depreciation and amortisation rose 6 per cent to £1.05bn.
Nexfibre is a joint venture owned by Liberty Global, Telefónica and InfraVia Capital Partners through which Virgin Media is building a full-fibre network.
More than 250,000 additional premises were passed with fibre in the third quarter and the group expects about 175,000 premises to transfer to the Nexfibre network within the next year as a result of its deal to acquire Upp, a so-called altnet it bought in September. Its owner, the Russian oligarch-backed investment company LetterOne, had been forced to sell the company on national security grounds.
Virgin Media O2 also announced it had sold a minority stake in the UK’s largest mobile tower network to a partnership of UK pension funds for about £360mn.
The 16.67 per cent stake in Cornerstone Telecommunications Infrastructure, a national network of about 20,000 sites used by both Virgin Media O2 and Vodafone UK, will be acquired by London-based GLIL Infrastructure. Virgin Media O2 will retain ownership of a third of Cornerstone.
