We upgrade our recommendation on Virgin Media Inc. (VMED) to Outperform. The company reported strong results for the first quarter of 2011. These solid results were primarily attributable to solid top-line growth, higher operating income, and customer's preference toward the company's bundled services.
Virgin Media's bundled service offerings are gaining increasing market traction. Customers are now more inclined toward high-margin premium services, which offer faster speed. At present, 63% of its total customers subscribes to the company's triple-play services. In the last quarter, quadplay penetration climbed 12% year over year.
Moreover, Virgin Media's Business segment performed exceptionally well, adding new enterprises to its high-speed fiber network. Strong free cash flow generation has helped the company to de-leverage its balance sheet and continue share repurchase.
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