/* ----------------------------------------------- Comment out annoying Snap... ----------------------------------------------- */

Monday, May 14, 2007

Virgin Media Cashflow Correction

In my article about the Virgin Media results, I stated that the cash outflow in the first quarter of 2007 was £41.9m before interest charges whereas the cash outflow actually includes the interest charges for the period. I could make an excuse about obscure differences between UK & US Accounting Practices, but I won’t: I made a mistake; I was wrong; I apologise and hope it hasn’t caused any inconvenience to any of my readers.

However, I hope that people won’t think the mistake invalidates my argument that a lack of flexibility on the Virgin Media balance sheet is causing an underinvestment in the network. I feel Virgin Media should be investing much more on increasing capacity, sunsetting the analogue TV service, investing in High Def channels, Video on Demand capacity and content, preparing for Docsis 3.0 and extending the speed gap between themselves and the adsl competitors.

Also to deal with another few emails and to make myself perfectly clear I do not think a large amount of debt is a problem for all companies in all situations. After all, there are tonnes of people in the City of London currently making fortunes from the wonders of leverage. However, it appears in the Virgin Media situation that they are not generating enough cash to service the debt AND invest for the future. This is a big problem especially as interest rates are on the rise and competition is starting to bite. This competition is not just from Sky, but also from Carphone, BT, mobile operators and from the Free-to-Air industry. I think that the current Virgin Media Executive Team message that all its current woes lie at the door of Sky fall far short of reality in the UK suburbs.

I would also like to point out that I sincerely appreciate the reader who emailed the tittle tattle line with details of my cock-up – all such communications are welcome. I would also like to point out that the reader had nothing whatsoever to do with Virgin Media, but someone else who values fair play.