Virgin Media, the cable group, slumped to a first-quarter operating loss of £15.3 million after losing 47,000 customers despite spending heavily on a rebranding campaign.

The figures from the former NTL:Telewest, in which Sir Richard Branson is the biggest shareholder, were hit by the departure of more than 63,000 telephone customers as a £25 million investment in promoting the newly-created Virgin Media brand failed to deliver an increase in its customer base.

The outlook was further clouded as Virgin also claimed that it had only just begun to suffer from its quarrel over carriage fees with BSkyB, the pay-TV leader, which has seen Virgin drop five of Sky’s basic channels from its platform

Gross customer additions in the first quarter were 184,300, down from 213,500 in the fourth quarter, "due to the loss of BSkyB’s basic channels from our platform and to increased competitor activity," Virgin said.

Sky is 39.1 per cent owned by News Corporation, parent company of Times Online.

Goldman Sachs, the Wall Street bank, said in a note: "We expect TV adds to turn negative in the second quarter as a result of the loss of Sky's basic tier channels and we expect the second quarter to see another quarter of overall customer loss."

A company source said that Virgin had hoped for more new customers, adding that the second quarter was likely to see subscribers leave the group's TV service after giving a required 30 days' notice.

Following the withdrawal of Sky's basic channels in February, which include Sky One and Sky News, after negotiations over price broke down, Virgin received a flood of complaints, with 200,000 related calls received in a matter of days.

However, the biggest hit in customer defections came from Virgin's telephony division, which lost 63,400 customers amid fierce competition from groups such as Carphone Warehouse.

Chris Frost, of uSwitch.com, the price comparison service, said: “Virgin Media have seen high cable broadband net additions, partly assisted by the special offers such as standalone broadband for just £10 a month. However, this has significantly impacted on Virgin Media’s telephony offering as customers taking advantage of this deal do not need to sign up to a fixed line service.”

The company added 87,900 net broadband customers in the quarter, giving it 3.15 million cable broadband subscribers in total.It had 36,100 new TV additions.

Virgin admitted that its heavy focus on broadband and television over the past year had led it to take its “eye off the ball” in the fixed-line telephony market.

The company, formerly known as NTL:Telewest, said that first-quarter revenues fell 5 per cent, to £305.7 million, compared with the same period a year earlier.

In the final quarter of last year it posted a £9.2 million profit.

Virgin added that average revenue per user had fallen to £42.75, from £42.82 in the previous three months.

Churn, or the percentage of customers who left the service, improved to 1.6 per cent a month from 1.7 per cent in the previous quarter due to fewer disconnections of customers who failed to pay bills.

Steve Burch, the chief executive officer of Virgin Media, said: "Our first quarter of 2007 shows strong growth in TV and broadband, while fixed-line telephone continues to struggle.”

This year Virgin Media launched its assault on the UK's pay-TV market, announcing a new interactive cable channel, tie-ups with Virgin's retail stores and plans to extend access to more than 97 per cent of UK households in the next year.

The new entity, formed by last year's £800 million acquisition of Virgin Mobile by NTL, the struggling cable group, offers "quad-play" bundles of services that include digital television, broadband access and fixed and mobile telephony.

Virgin has filed legal action in the High Court over its carriage-fee dispute with Sky, accusing its rival of misusing its market position.

Sky's acquisition last year of a 17.9 per cent stake in ITV drew similar comments on competition. At the time NTL was seeking to bid for ITV.

Sky's acquisition has been referred to Alistair Darling, the Secretary of State for Trade and Industry, who must decide whether to send the case to the Competition Commission.

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