* Q2 cable customers down 36,000 at 4.78 mln, ARPU up 3 pct
* Sales up 2 pct at 986 mln pounds
* Operating cash flow up 6 pct at 392 mln pounds
* Shares down 3 percent
(Adds shares, analyst comment, details on segments, debt)
By Georgina Prodhan
LONDON, July 27 Britain's Virgin Media
lost 36,000 cable customers in the second quarter,
offsetting some of the benefit of an increase in average spend
by those who remained.
Virgin Media, which has Britain's fastest broadband
connections and also sells TV and telephony services, increased
sales by 2 percent to 986 million pounds ($1.62 billion),
broadly in line with analysts' forecasts.
The company also announced a new, larger-than-expected 850
million-pound share buyback and debt repayment programme and
said it was on track to meet its debt target of 3 times
operational cashflow over the next one to two years.
Virgin Media shares were down 3 percent in London, where
they are thinly traded, with their main listing in New York.
"We believe this weakness will prove temporary and VMED's
pricing power in consumer cable will sustain strong FCF growth,
with large share buybacks emphasizing management's confidence,"
Goldman Sachs analyst Tim Boddy wrote.
Chief Executive Neil Berkett said he was satisfied with the
results in a seasonally weak quarter when the British economy
grew just 0.2 percent.
"We are acquiring and growing data-savvy, data-hungry
customers," he told Reuters in a telephone interview. Asked
about the current quarter, he said: "The confidence level of
consumers has not really lifted."
Virgin Media competes with telecoms provider BT and
satellite broadcaster BSkyB to supply broadband,
broadcast and on-demand TV and mobile and home telephony.
By mid-2012 it aims to offer broadband speeds of 100
megabits per second -- fast enough to download a music album in
5 seconds -- to all homes on its network, which covers about
half of Britain's households.
Virgin Media's second-quarter operating cashflow rose 6
percent to 392 million pounds, beating expectations, and free
cashflow rose 13 percent to 123 million pounds.
Average revenue per cable user rose 3 percent to 47.35
pounds per month, while average monthly churn -- the percentage
of customers leaving -- rose slightly to 1.4 percent.
But Virgin Media struggled to grow revenues in some of its
less core services.
Mobile revenues fell by 3 percent despite high customer
growth because of regulatory changes to connection fees, while
business sales were flat as lower voice and wholesale revenues
set off the benefit of higher data revenues.
New York-traded Virgin Media shares have risen 3 percent
this year so far, outperforming a 6 percent decline in the
European media index . Its London-traded stock is little
changed from the start of the year.
(Reporting by Georgina Prodhan; Editing by Greg Mahlich and