News 2005
Virgin Mobile continues strong, profitable growth through Christmas quarter and reaches 5 million connections
01/02/2005
Virgin Mobile Holdings (UK) plc ("Virgin Mobile"), the UK's largest mobile virtual network operator (MVNO), today announced its key performance indicators (KPIs) for the three months to 31 December 2004.
Highlights
- Strong growth with 417,000 net additions; best ever connections quarter
- Total reported connections of 5,026,000 (31 Dec 03: 3,678,000), up 37%
- Q3 service revenue up 9.4% year on year (up 19.7% excluding Ofcom)
- ARPU trend developed in line with expectations; rolling 12 month ARPU of £132
- Subscriber Acquisition Costs (SACs) controlled at £28
Tom Alexander, Chief Executive of Virgin Mobile, said:
"I’m very pleased to report another strong set of figures for Virgin Mobile; the company continues to expand in a very competitive market. Our performance demonstrates once again the strong consumer appeal of our brand, as well as the robustness of our virtual business model.
“In this last Christmas quarter we enjoyed record connections – our best ever quarter - resulting in Virgin Mobile passing its 5 million milestone. Strong January trading has seen us make a good start to 2005.
“I am delighted Virgin Mobile was recently voted network of the year*. The compelling appeal of our brand, our outstanding customer service, and our consumer-friendly, value for money products are driving growth. The efficiencies in our business operations have helped to improve operating profit margins, and deliver profitable growth in line with our ambition.”
Operational review
Connections Growth
Connections volume accelerated into the third quarter with strong net additions of 417,000. This increased our reported connected base to 5,026,000, up 37% on a year ago.
The number of customers who have used their SIM connection within the past 90 days has increased by 25% on a year ago, and was up 275,000 in the quarter. As at 31 December 2004, the 90-day activity level was 77.2%. The expected competitiveness of the market was reflected in higher churn at 16.2%.
ARPU
Our rolling 12 month ARPU was £132 in line with expectations. The reduction from £137 in the previous quarter mainly reflects the impact of the Ofcom interconnect rate cuts in September 2004.
Service revenue grew by 9.4% in the quarter compared to a year ago. The underlying rate of growth, excluding the one-off impact of the Ofcom cut, was 19.7%. This, combined with improved productivity and low incremental support costs, fuels the growing cash generation and profitability of our company.
Non-voice services have increased to 29.7% of service revenue, up from 29.0% the previous quarter on a rolling 12 months basis.
SACs
Virgin Mobile’s continued growth has been achieved with only a relatively modest increase in SACs, in highly competitive market conditions. SACs were £28 for the quarter, in line with the planned seasonal increase we signalled at the interim results. This achievement is the result of our strategy of pursuing profitable growth, through balanced acquisition and retention economics.
Outlook
Virgin Mobile’s strong connections performance has continued throughout January – being 25% ahead of the same month last year. Our operating leverage and controlled SACs are delivering improved operating profit margins, and we are on track to deliver profits in line with the consensus range.
The business continues to be strongly cash generative and we maintain our guidance on capital expenditure and dividend policy.
Quarterly key performance indicators
Quarter to 31 Dec 2003 | Quarter to 31 Mar 2004 | Quarter to 30 Jun 2004 | Quarter to 30 Sep 2004 | Quarter to 31 Dec 2004 | |
|---|---|---|---|---|---|
Connected base (000) | 3,679 | 3,962 | 4,249 | 4,609 | 5,026 |
Net additions (000) | 540 | 283 | 287 | 360 | 417 |
Churn rate** | 13.8% | 14.0% | 15.2% | 14.3% | 16.2% |
Activity level | 84.3% | 81.8% | 79.8% | 78.2% | 77.2% |
ARPU** | na | £147 | £142 | £137 | £132 |
Non-voice services % of service revenue** | na | 28.0% | 28.7% | 29.0% | 29.7% |
SAC per gross connect | £24 | £30 | £28 | £24 | £28 |
NOTES
Cautionary Statement Regarding Forward-Looking Statements
This document contains certain forward-looking statements. We have based these forward-looking statements on our current plans, expectations and projections about future events. These forward-looking statements are subject to risks, uncertainties and assumptions about us. Forward-looking statements speak only as of the date they are made. If any one or more of the foregoing assumptions are ultimately incorrect, our actual results may differ from our expectations based on these assumptions. Also, the sector and markets in which we operate may not grow over the next several years as expected, or at all. The failure of these markets to grow as expected may have a material adverse effect on our business, operating results and financial condition and the market price of our ordinary shares.
*What Mobile magazine awards 2004/05, February 2005.
** On a rolling 12 month basis.
CONTACTS
Virgin Mobile
Steven Day, Corporate Affairs Director, +44 (0)7931 777777 or +44 (0)20 7484 4300.
Investors and Analysts
Alan Gow, Chief Financial Officer, +44 (0)7981 940244 or +44 (0)20 7484 4300.
Finsbury
James Murgatroyd or Julius Duncan +44 (0)20 7251 3801.
There will be a conference call for analysts and investors beginning at 09.30am. The dial in number is +44 (0)20 7162 0182. A recording of the call will be available through our website about.virginmobile.com/about/ir/downloads. It will be archived for three months.
