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Virgin Media's drop in video subs dents parent Liberty Global

Liberty Global PLC lost 28,800 subscribers in its June quarter, compared to a gain of 40,800 year over year, due in part to unit Virgin Media's dip in video customers in the United Kingdom and Ireland.

Virgin reported a loss of 27,000 video organic revenue-generating units, or RGUs, during the quarter ending June 30. The telco said the drop was caused by a shift in focus away from entry-level TV packages to capital efficiency.

It managed to offset the decline by adding 17,000 voice and 5,000 broadband subscriptions. Overall, it lost 5,000 RGUs and 6,000 customers in what its parent described as a seasonally weak quarter.

"In the second quarter this year, we saw steady video losses, but slower growth in broadband and voice driven primarily by competitive market dynamics in the U.K.," CEO Mike Fries said on an earnings call August 8. "Competition has ratcheted up, especially at the lower end of both broadband and TV."

As of June 30, Virgin had a total of 14.7 million broadband subscribers, 6.0 million cable customers and 3.2 million mobile subscribers.

Fries said Virgin had scope to expand further by doubling its ultra-fast broadband speeds to 1 Gbps, an upgrade that was "just around the corner."

This meant Virgin was best positioned to deliver on the U.K.'s plan to roll out nationwide fiber broadband by 2025, he added, whereas rivals such as BT Group PLC and smaller fiber providers will struggle without "substantial regulatory relief."

Fries reiterated Virgin's ambitions to deliver 1Gbps to 15 million homes by the end of 2021, including both full fiber connections and hybrid connections.

Virgin plans to upgrade the latter to achieve these faster speeds by the end of 2019. Prime Minister Boris Johnson has pledged full fiber connections for the whole of the U.K. in the next six years.

Comparatively, BT has connected 1.5 million homes to full fiber broadband, with plans to cover 4 million by March 2021 and 15 million by 2025.

Virgin Media's network expansion endeavor — called Project Lightning — has meanwhile reached over 1.8 million premises, including 232,000 in the first half of 2019, Fries said on the call.

Elsewhere in Europe, Liberty Global reported subscriber losses in countries including Switzerland, where its unit UPC lost 28,000 RGUs, and Belgium, where Telenet lost 20,000 — though these drops were lower than in the prior-year period.

Liberty's second-quarter revenues from continuing operations dropped 5.5% year over year to $2.85 billion from $3.02 billion, which the company attributed to the weakening British pound and euro against the U.S. dollar.

This excludes its Germany and Eastern European businesses, which were recently sold to Vodafone Group PLC but includes its Swiss assets, which are expected to be sold to Sunrise Communications Group AG in the fourth quarter.

Liberty Global reported net earnings attributable to shareholders of $53 million for the second quarter, compared to $912.6 million year over year.

The firm also announced plans to launch cash tender offers, consisting of class A and class C ordinary shares, around August 12 for an aggregate total value of up to $2.5 billion.

Liberty confirmed its full-year outlook including adjusted free cash flow of $550 million to $600 million, a $2.7 billion decline in property and equipment additions and flat to declining operating cash flow.