Cable group Virgin Media lost almost 20,000 customers in the second quarter of 2008 but beat analyst expectations by posting an underlying operating profit of £333m for the period.

Virgin Media reported a net customer loss of 19,500 customers in the three months to the end of June. Analysts had estimated it would add about 1,000 compared with a reduction of 70,300 customers in the same period last year.

The company reported revenues of £990.5m, slightly lower than analyst expectations, with average revenue per subscriber slightly down to £41.63. ARPU had been £42.16 in the same period last year.

Virgin Media reported an operating loss of £333m in the second quarter, compared with a £3m profit in the second quarter last year, mainly due to a £366m non-cash goodwill impairment charge relating to the company's mobile operation, Virgin Mobile.

Once this £366m goodwill charge is stripped out of the figures, Virgin Media's underlying operating profit before depreciation, amortisation and other charges was £333m in the second quarter.

The revaluation of the Virgin Mobile business is not wholly unexpected given the tougher economic conditions for the company's most consumer-facing businesses.

However, it raises questions over the company's willingness to stump up £962.4m for a 30-year licence for the Virgin Mobile brand, nearly a 20% premium on the telephone business's stock market valuation in 2006 when the deal was done with Richard Branson.

The company said that the impairment review considered the mobile operation as a stand-alone business and "did not reflect the benefits and synergies that Virgin Media as a whole is deriving from the acquisition of Virgin Mobile".

Virgin Media's churn rate - the proportion of customers cancelling services - fell to 1.3% compared with 1.8% a year ago.

"This is about a value shift in our customer base. We budgeted for a net subscriber loss. What I am interested in is ARPU, churn rate and the number of products we sell. We are shifting to a value strategy and are keeping the [valuable] customers we have," said Virgin Media's chief executive, Neil Berkett.

Berkett highlighted a 139% year-on-year increase in the net range of products Virgin Media sold to customers, from a net of 59,000 last year to 136,800 in the second quarter of 2008, as evidence that the strategy to boost ARPU is working.

He added that the company had lost fewer valuable customers, such as 24,000 subscribers who only subscribed to telephone services with Virgin Media, while increasing the penetration of those who had at least three products to 53.1%.

"We have increased our triple-play penetration by about two percentage points for something like each of the last nine quarters. It could end out well north of 60%," Berkett said.

Virgin Media said it added 24,800 net new customers for its cable TV service in the second quarter, bringing the total subscriber base to 3.54 million.

Berkett said Virgin Media was having "very cordial" but so far "unsuccessful" conversations with BSkyB about striking a deal to have the satellite company's basic TV package - which includes channels such as Sky1 - returned to its cable TV network.

"The conversations have been very cordial, just unsuccessful. We will just have to wait and see," he added.

Virgin Media also reported 54,600 net new additions to its broadband service, bringing the total subscriber base to 3.84 million, although 273,000 are not provided by the company's own cable network.

The company said the number of customers taking its top-tier 20Mb broadband service was up 83% year-on-year in the second quarter.

Telephony saw a net rise of 3,400 customers, compared with a loss of 56,900 in the same quarter last year, bringing the total number of subscribers to 4.17 million.

Virgin Media also added 55,900 net contract mobile customers to its Virgin Mobile service.

Berkett said he expected product sales to be "roughly the same" year on year for the third quarter - about 187,000 - and that ARPU would "remain stable" in the second half of the year.

"Clearly we can't be complacent as there is a softening in the market out there," he added. "We have always said that we would have a stronger second half in terms of subscribers. The second quarter is traditionally weaker."

· To contact the MediaGuardian news desk email editor@mediatheguardian.com or phone 020 7239 9857. For all other inquiries please call the main Guardian switchboard on 020 7278 2332.

· If you are writing a comment for publication, please mark clearly "for publication".