Virgin Media O2 - comment
Subscriber numbers were a little above our expectations, but the friction in Revenue and EBITDA continues. There will be at best a modest rise in leverage in 2026, with revenue down 3% - 5% and EBITDA down by a similar amount. Distributions to shareholders are forecast at GBP200m (vs GBP300m – GBP400m forecast in 2025) and will consume free cash flow. That said, VMED continues to generate strong operating cash flow and can cover its debt. The downside could come from VMED’s balance sheet being used to fund the purchase of Netomnia, but we expect that Liberty and Telefonica will fund any bid here directly. We will update our VMED model and speak with you all soon.
The Consumer Fixed business is suffering as customers reduce spending on streaming services. In April 2025, VMED increased the headline package costs by RPI + 3.9% c7.5%. Actual revenue fell 3.3% on subscriber numbers <1%. There will be a mixture of customers down-tiering and promotional offers from Virgin to keep subscribers at the expense of Revenue.
The Mobile business saw subs up 2%, but Revenues down 4%. As with Consumer Fixed, competition is forcing promotional activity to chip away at revenue.