UPDATE 3-Virgin Media boosted by record user spend

* Adds 14,100 net new customers in Q3, v 21,000 forecast

* Key operating cash flow up 11 pct, beating forecasts

* Extracting record revenue per user

* Shares down 2 percent

(Adds shares, analyst reaction)

By Kate Holton

LONDON, Oct 27 (BestGrowthStock) – Virgin Media (VMED.O: ) drew record
spending from customers in the third quarter in the face of a
marketing onslaught by rivals which held back the number of new
users to the British cable operator’s services.

Analysts welcomed the better-than-expected revenue and
earnings figures but noted customer net additions were below
forecasts, and shares in the group fell 2 percent.

Virgin Media, which competes in Britain with BT (BT.L: ) and
BSkyB (BSY.L: ) to provide broadband, telephony and pay-TV, said
it added 14,100 net new customers, compared with a forecast
21,000 in a poll of analysts by Reuters.

The group also posted slightly higher cancellations as BT
and BSkyB engaged in a fierce marketing war to draw in new
business.

But Virgin Media Chief Executive Neil Berkett said he was
delighted with the results which showed the group cross-selling
more products and drawing in a solid number of customers without
having to spend strongly on marketing.

BSkyB said last week it had spent 302 million pounds in its
first quarter on marketing, while Virgin spent 37 million.

Analysts also forecast that the marketing campaign, timed
for the start of the new English Premier League soccer season,
would ease in the future.

“We are seeing top line growth of 5 or 6 percent but you are
seeing the best part of 20 percent free cash flow growth and
that is because of our financial discipline, that is strong cost
control and we are really really pleased,” Berkett said.

Shares in Virgin Media, listed in the United States, are up
over 70 percent in the last 12 months.

The group sold more to existing customers, with 62.7 percent
now taking three products, helping Virgin to post record average
revenue per user of 46.38 pounds.

Virgin Media has benefited since it moved its focus to
delivering faster broadband products and TV on demand, and said
on Wednesday it had launched the pre-registration service for
100 Mb broadband, which is due to go on sale in December.

The new offering will allow users to download a music album
in 5 seconds, a television show in 30 seconds and a movie in 90
seconds.

The group posted a 6.4 percent rise in third-quarter revenue
to 978 million pounds ($1.55 billion), compared with
expectations of 968 million pounds.

The key operating cash flow (OCF) metric was up 11 percent
to 387 million pounds, compared with the forecast of 376 million
in the fourth successive quarter of double digit percentage
growth.

Execution Noble analyst Will Draper told Reuters the results
were solid, showing good growth in broadband and television.

“To have grown broadband at a time when there has been
intense rivalry between BT and BSkyB is a pretty good result,”
he said. “They have also stood aside from the promotions and
they have saved their fire power for another quarter.

Virgin Media in July launched a share buyback of up to 375
million pounds over the next 12 months. The buyback is part of a
700 million pounds capital return programme that will also pay
down debt.

It said on Wednesday it had completed an initial buyback of
125 million pounds of stock and retained the authority for a
further 250 million pounds. It also announced the execution of
conversion hedges against the potential dilution from the
conversion of the 2016 convertible notes.
(Editing by David Cowell and Dan Lalor)
($1 = 0.6298 pound)

UPDATE 3-Virgin Media boosted by record user spend