Virgin Media Inc.

The stable outlook on VMED mirrors our stable outlook on its parent company, international cable television and broadband services provider Liberty Global PLC (BB-/Stable/—), because we consider Virgin Media to be a core subsidiary of Liberty Global. We do not expect to change our long-term issuer credit rating or outlook on Virgin Media unless we reassess the entity's strategic importance to Liberty Global or raise or lower our long-term rating on Liberty Global. On a stand-alone basis, we expect that Virgin Media will experience 0%-1% organic revenue growth and stable EBITDA margins of 37%-38% in the medium term. We expect adjusted leverage to remain at about 6x over the next few years due to minor EBITDA growth and some debt

...VMED is unlikely to significantly gain subscribers or raise prices in the intensely competitive broadband market. The U.K. broadband market has experienced intense competition in recent periods, especially in the lower end of the market, somewhat exacerbated by lower fiber access fees paid by alternative fixed-line players like Vodafone and TalkTalk. As a result there is a pricing difference of about 30% between low end offers and VMED's promotional broadband offer (table 1). While we think that VMED's network can sustain premium pricing, we think the broadband market maturity, along with ambitions by players like Vodafone to increase their market share, limits VMED's ability to gain subscribers and sustain annual mid-single-digit price increases. In addition, increases in average revenue per user (ARPU) are capped by: (1) declining potential to move customers to higher data bundles as more than 70% of VMED's broadband customers already subscribe to speeds of 100 megabits per second (Mbps)...

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