@asim18 wrote:
@Andrew-G wrote:
With a worsening economic climate and rising interest rates VM may even choose to slow the progress on that, because investment like that consumes a lot of cash for no immediate commercial return, and that's money VM have to borrow.
I am shocked that VM have to borrow money.
They take in £250,000,000 per month if you calculate 5M customers paying a median of £50 p/m.
That equates to THREE BILLION per year.
The fact that VM needs to borrow money to lay fibre cabling after almost two decades cash-cowing the UK's CATV network, instead of just paying for it out of internal revenues just shows how much cash is being syphoned out of the business.
The only reason they would borrow money is to have the total amount of contract in their accounts immediately. So if you show the lender you have 5 million 18 month contracts worth £50p/m they can lend you the entire lump sum of 4.5 BILLION pounds after just a month.
Sorry for slow response, you're right - Virgin Media Ltd (so ignoring O2) had turnover of £3.4 billion in 2021 according to their published accounts. Unfortunately their cost of sales was £900 million (mainly pass through costs for TV content and day to day network operating costs), and their administrative expenses (sales, marketing & advertising, customer services, billing, internal IT/HR, facilities etc) were £2.6bn. If I ignore other operating income (a transfer from other group companies), then in 2021 VM Ltd didn't even make an operating profit, never mind pay for the amortisation of well over £10bn of assets nor the interest on the debt. As per the earlier post, there's so much smoke and mirrors on the accounting side that the truth is more nuanced, but the broad brush picture is clear enough if you look.
To say cash is being syphoned out of the business might be read to imply that somebody's making a killing with ill-gotten gains but that isn't evident. Certainly the lenders will be being paid, but the crux of the profitability questions seems to be that VM's routine business costs (once you include interest and amortisation) appear to be substantially higher than the UK broadband market will support. In the US, cable companies often have well protected local monopolies, and can and do charge what they like for an often miserable service. In the UK there's Openreach alternatives, growing mobile broadband options and a growing number of altnet fibre providers (CityFibre, Hyperoptic, Gigaclear, Lit, and the like), whose networks now pass one in three UK homes. There are of course a small number of VM customers that will choose to stick with VM and pay undiscounted pricing, but most are seeking a deal to stay or take their business elsewhere, and this explains why the net customer growth from seven years of network extension through Project Lightning is diddly squat. In economic terms, VM are a price taker, with large Openreach-using ISPs being the price setters. A few VM customers have always paid more for better speeds, but even that slice of the market is being eroded by other options - I've been with VM for 25+ years, but recently switched to an Openreach FTTP option, giving me faster speeds than I'd chosen from VM for less money. VM's retention team would have discounted heavily to keep me (if I'd allowed them, and only after I'd issued cancellation notice, not before), but that then converts me to a very low profit customer.
All in all, the outlook is not good for VM, with no obvious means of improving profitability, fast growing high speed competition, and a need to renew their UK infrastructure to eliminate coax. Telefonica (Spanish owners of O2) thought that merging O2 with VM was a great way forward, I suspect they're starting to realise that they've made the most awful and irretrievable mistake.
