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BT ‘prepared for fight’ as Virgin Media rolls out Lightning

BT's Gavin Patterson

BT’s Gavin Patterson

BT is “prepared for the fight” over broadband and quad-play with Virgin Media as the cable operator embarks on its Project Lightning expansion of high-speed broadband to four million additional homes in the UK, according to CEO Gavin Patterson.

Speaking to analysts after the company released full-year results at the end of last week, Patterson said that BT was taking the challenge from Virgin Media’s “ambitious plan” to expand its broadband footprint “very seriously” but that he believed it would be challenging for Virgin Media to grow its base significantly.

Noting that Virgin Media’s base had “not grown dramatically” since cable’s consolidation, he said that “in terms of the day-to-day competitiveness of what they offer today, I think they will find it a much harder market to go and win 40% market share of than they had in the 1990s”. He said Virgin Media would have to win a lot of high-value customers from both BT and Sky to make the economics of its investment work.

Virgin Media’s marketing of broadband in new areas is now underway and expected to accelerate during the summer. On Liberty Global’s own first quarter earnings call last week, CEO Mike Fries said that early trial results were showing penetration in line with expectations and ARPU slightly above expectations. The UK operator expects to add 150,000 homes this year on top of the 36,000 signed up during the early trial phase of the project.

Virgin Media CEO Tom Mockridge, also speaking on the Liberty Global call, said that the company was confident it would be able to “compete very effectively against BT” and noted that Virgin Media had a window of opportunity to make headway before BT closed its acquisition of EE and began promoting quad-play heavily.

Regarding BT’s TV service, meanwhile, the UK operator plans to focus on increasing the volume of sales rather than increasing ARPU immediately, according to John Petter, CEO, BT Consumer.

Petter told analysts that a relatively small proportion of BT’s base currently subscribed to its TV services, “so the big opportunity is in volume”. He said that the current service was “extremely cheap”, so there would be opportunities to increase revenue as it added more features, “but first it’s about volume”.

Customers who take TV from BT are twice as likely as others to recommend its services as copper-only customers, Patterson told the analysts.

Patterson meanwhile noted that the last quarter’s EBITDA was up 2% on the comparable figure two years ago, before its huge investment in BT Sport. “I think that demonstrates that investment in sport has worked for us – it has driven the top and bottom line,” he said.