By Kate Holton
LONDON (Reuters) - Customers of Britain's Virgin Media spent record sums in the first quarter, showing a willingness to pay extra for faster broadband speeds and phone services in spite of the tough economic environment.
The strong performance with domestic customers, which helped the group to post results in line with forecasts, was boosted by a solid showing from the business division which has signed up companies drawn to its high speed fiber network.
"What we're seeing is a demand for connectivity," Finance Director Eamonn O'Hare told Reuters in an interview. "Customers want higher quality and higher speed broadband and what this quarter underlines is that they're prepared to pay for it."
Virgin Media, which competes with pay-TV company BSkyB and telecoms and broadband providers such as BT, said on Wednesday more than 63 percent of its customers took three products from the company.
So-called quad-play penetration, where a household takes TV, broadband, fixed-line and mobile phone services, increased to around 12 percent, compared with 11 percent a year ago.
"Our focus now is to play much more into providing mobiles into our cable base," said O'Hare. "We have 5 million customers and only 15 percent of them take a mobile product at the moment so the focus is to drive in to that other 85 percent."
The group also said it would begin trialing the world's fastest cable broadband, testing speeds of 1.5 Gb.
Analysts welcomed the solid customer growth and were also encouraged by the mix of new customers, with 39 percent of new subscribers in the quarter ordering speeds of 20 Mb or higher, compared with just 15 percent a year ago.
The desire for faster speeds and more pay-TV meant customers were on average paying 46.16 pounds a month, a record for the time of the year, the firm said, adding it recruited a net 20,200 new customers.
"Virgin Media's solid Q1 results strengthen our confidence in the sustainability of growth," Goldman Sachs said in a note. "Customer quality and hence lifetime value continues to improve, business growth is accelerating and mobile growth should improve further."
First-quarter revenue rose 5.7 percent to 982 million pounds ($1.6 billion) and operating cash flow climbed 7.6 percent to 376 million pounds, both in line with analysts' consensus forecasts.
Free cash flow more than doubled to 100 million pounds.
(Reporting by Kate Holton; Editing by Paul Sandle and Mark Potter)