Liberty Global swallows Virgin Media to tackle Murdoch’s BSkyB
US cable giant Liberty Global is to buy Virgin Media for $23.3 billion (£15bn). The cable, broadband and phone provider will continue to use the Virgin brand under a 30 year licence deal. Virgin also announced healthy annual results today.
Liberty Global, the company owed by US billionaire John Malone, now has 25 million customers worldwide, and European in countries including Germany and Belgium. Malone has wanted to buy the UK cable provider since before it became Virgin Media.
The purchase agreement comes as Virgin Media announced that its profit for the last year was £699 million, nearly 30 percent higher than the previous year.
Virgin bought out
Despite the Virgin brand, Virgin Media actually has little to do with Richard Branson’s Virgin Group. The Group has reduced its stake in Virgin Media to three percent, and has simply received a share of its profits – last year around £10 million. The Virgin Group had no say in the Liberty deal, and a thirty-year licence to use the Virgin brand will remain intact.
Virgin Media chief executive Neil Berkett, however, has said he will step down – although he endorsed the deal: “The combined company will be able to grow faster and deliver enhanced returns by capitalising on the exciting opportunities that the digital revolution presents, both in the UK and across Europe.”
Branson also gave his blessing: “This deal is good news for the company, its customers and our people. Together, Liberty Global and Virgin Media are in a great position to shake up the industry and bring the full power of digital technology to UK consumers.”
Virgin Media was formed from the combined NTL and Telewest cable companies, which merged in 2006 – and Liberty’s interest goes back further than that. Before the merger, Malone had previously made two unsuccessful attempts to buy NTL, and actually bought a quarter of Telewest’s equity.
Malone’s ambition in the UK is all about a battle with Rupert Murdoch though – he once held an 18 percent stake in Murdoch’s News Corp, forcing Rupert Murdoch to buy him out.
Liberty Global owns 58 percent of Belgium’s Telenet, and has networks in the Netherlands, Germany, Switzerland and Chile. Being part of a global business might reduce Virgin’s costs for the purchase of set-top-boxes and other technology somewhat.
Analysts predict that the move is the start of a bid to create a pan-European triple-play cable provider. “In the near term it will make the UK the ring for a straight slug fest between two global pay-TV heavyweights, John Malone and Rupert Murdoch, as they battle for UK fixed broadband, fixed voice and pay-TV subscribers,” commented Adrian Drury, principal analyst at Ovum.
Drury, speaking before the deal was finalised, also predicted “collateral damage” to other telcos such as Talk Talk and BT.
The last big UK telecoms and media sector deal was the merger of T-Mobile and Orange in 2010 which created EE.
Virgin Media’s 2012 results came out today, and showed what the company described as “high quality revenue growth”. The company added nearly 90,000 customers, nearly half of these in the fourth quarter.
As well as increasing profits, the company is persuading users to spend more on cable and other services – the average revenue per user (ARPU) hit a healthy £48.87 in the fourth quarter, and overall revenue went up 2.7 percent to £4 billion for the year.
Virgin Media’s broadband business increased to a total of 4.27 million, with the addition of 1.5 million customers on superfast (30Mb plus) broadband.
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