News 2005
Virgin Mobile continues momentum in the first quarter and successfully launches into contract market
19/07/2005
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 30 June 2005.
KPI highlights
- Active customers grew 21% to 4,109,000 (30 Jun 04: 3,392,000)
- Net active additions of 77,000 (quarter to 30 Jun 04: 150,000)
- Q1 service revenue up 6.8% on Q1 last year (up 18.3% excluding Ofcom)
- Full year service revenue guidance underpinned by strong ex-Ofcom revenue growth in the quarter, rising monthly prepay ARPU trend and strong growth in contract revenues
- Rolling 12 month ARPU of £123 (31 Mar 05: £127)
- Blended SAC per connection of £32 (prepay SAC £30; quarter to 30 Jun 04: £28), reflecting improved prepay customer quality & contract customer acquisition
Operational highlights
- New contract offer, Virgin Mobile Pay Monthly, makes a strong start
- Gross trading activity buoyant; 24% up on Q1 last year
- Launched “Red” rewards, offering prepay customers usage-related upgrade discounts
- Partnered with BT Livetime to launch live digital mobile TV pilot
- Launched exclusive Lobster handset range, targeting 16-30 year olds
- Topped J.D. Power & Associates customer satisfaction survey for 2nd consecutive year
Tom Alexander, Chief Executive of Virgin Mobile, said:
"These results demonstrate that Virgin Mobile continues to grow strongly and thrive in a competitive market - thanks to a combination of our iconic brand, our devotion to excellent customer service, and our innovative products.
"We've made a powerful start to the year with our new contract offer, Virgin Mobile Pay Monthly, in The Carphone Warehouse - a product that provides a substantial source of growth for our company. Our primary focus continues to be on the mass consumer pre-pay market, and our aim remains to deliver the best service in the industry, helping to generate increased customer loyalty.
"We are looking forward to the rest of the financial year - a period of continuing strong customer expansion and superior revenue growth. We are confident our performance and momentum will deliver another successful year."
Connections Growth
During the quarter, we focussed on increasing the quality of customer additions by rebalancing the volume of low-end handsets in the acquisition mix. Despite this, customer growth remained strong at 21% year-on-year: active customers reached 4,109,000 (30 Jun 04: 3,392,000).
Net active additions were 77,000 in the quarter; this performance versus the quarter to 30 Jun 04 (150,000), reflects the focus on quality additions as discussed above, the arithmetic effect of churn and upgrade activity on a significantly larger customer base than a year ago, together with the rising level of industry churn. Virgin Mobile is of course a net beneficiary of industry churn. Connected SIMs grew 32% to 5,606,000 (30 Jun 04: 4,249,000).
Churn on the active customer base, adjusted for upgrade activity, increased to 24.0% (31 Mar 05: 22.6%) for reasons discussed above. Churn of connected SIMS was 19.6% (31 Mar 05: 17.5%).
ARPU
In line with expectations, ARPU was £123, compared to £127 at 31 Mar 05. This change primarily reflects the impact of the Ofcom interconnect rate cuts in September 2004. Improved quality of customer additions in the quarter led to the arrestment of prepay ARPU dilution. Underlying monthly ARPU rose over the quarter.
Service revenue grew by 6.8% in the quarter compared to a year ago. The underlying rate of growth, excluding the one-off impact of the Ofcom cut, was 18.3%.
Non-voice services have increased to 31.5% of service revenue, up from 31.2% the previous quarter.
SACs
SACs have increased to £32 for the quarter. This increase includes contract customer acquisition, with prepay SACs for the quarter of £30 (quarter to 30 Jun 04: £28), reflecting the mix impact of rebalancing the volume of low-end handsets sold.
Outlook
Our performance during the quarter was consistent with guidance for the year to 31 March 2006, which we re-iterate.
With just two months of further dilution from the Ofcom impact to come, improving ARPU trends, and growing contribution from contract revenues, we remain confident of full year service revenue growth in the mid-teens.
Our industry-leading service revenue growth and operating leverage are delivering improved underlying profit margins, while our investment in contract customer acquisition is expected to dilute total EBIT margins by zero to one percentage points for the full year, as outlined at the presentation of our full year results.
The business remains strongly cash generative and we continue to expect a broadly stable cashflow margin with an increased dividend payout ratio of 50% for the 2005/6 financial year.
Quarter ending | 30 Jun 2004 | 30 Sep 2004 | 31 Dec 2004 | 31 Mar 2005 | 30 Jun 2005 |
|---|---|---|---|---|---|
| 90 day active customers (000) | 3,392 | 3,604 | 3,879 | 4,032 | 4,109 |
| Net 90 day active customer additions (000) | 150 | 212 | 276 | 152 | 77 |
| Connected SIMs (000) | 4,249 | 4,609 | 5,026 | 5,360 | 5,606 |
| Connected SIM churn * | 15.2% | 14.3% | 16.2% | 17.5% | 19.6% |
| ARPU * (active customers) | £142 | £137 | £132 | £127 | £123 |
| Non-voice services % of service revenue * | 28.7% | 29.0% | 29.7% | 31.2% | 31.5% |
| SAC per gross addition | £28 | £24 | £28 | £23 | £32 |
* Rolling 12 month basis.
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 forwardlooking 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.
CONTACTS
Virgin Mobile
Steven Day, Corporate Affairs Director, +44 (0)7931 777777 or +44 (0)20 7484 4300.
Investors and Analysts
Mike Thomas, Head of Corporate Finance & Investor Relations +44 (0)20 7484 4300.
Finsbury
James Murgatroyd or Don Hunter +44 (0)20 7251 3801.
