Virgin Media Enhances SMB Package - Analyst Blog

Virgin Media Inc. (VMED), a leading cable MSO and broadband service provider in the U.K., has decided to strengthen its small and mid-sized business (SMB) businesses offering unlimited bandwidth for Internet access. This is the company’s response to its customer grievance for slow speed and frequent disruption of Internet connections.

After BT Group Plc. (BT) and Cable & Wireless Worldwide, Virgin Media is the third largest corporate broadband service provider in the U.K. servicing 1,500 clients. Since the company mainly services retail customers, it has a vast unutilized captive network during the day time. Management is trying to use that whole network to offer unlimited bandwidth to its corporate clients.

This new enhanced Internet service, which the company called “Big Red Internet”, will offer 100 Mbps access speed to small enterprises and 1 Gbps access speed to mid-sized enterprises. The company is hopeful that its fiber optic network will cover 85% of its clients by end 2010.

Overall Business segment revenue, in the second quarter 2010, was more than $229 million, up 7.2% year over year. Within this segment, the high-margin Retail data revenue was $94.5 million, up 26.3% year over year. Retail voice revenue was $61.4 million, down 6.2% year over year. LAN solutions revenue was $14.6 million, remain flat year over year. Wholesale revenue was $58.7 million, remain flat year over year.

For retail customers, Virgin Media is all set to introduce super-fast EuroDOCSIS 3.0 network offering a downstream speed of 100 Mbps and an upstream speed of at least 10 Mbps by the end of 2010. The company currently offers EuroDOCSIS 3.0 network in three different tiers offering downstream speed of 10 Mbps, 20 mbps, and 50 Mbps. Virgin Media added 22,300 cable TV subscribers in the second quarter of ki2010. Leveraging the technological superiority of its fiber optic cable network, the 100 Mbps tier will place the company as the only mass-market provider of ultra-fast speeds in the UK .

We maintain our long-term Neutral recommendation for Virgin Media. Currently, it is a short-term Zacks #3 Rank (hold) stock.