Liberty Global to acquire Virgin Media
Virgin Media today confirmed that it has accepted a £15 billion takeover from John Malone’s Liberty Global, creating the world’s largest broadband communications company.
The move will see the company cover 47 million homes and serve 25 million customers across 14 countries, with a focus on the strongest and most strategic markets in Europe.
Mike Fries, President and CEO of Liberty Global, said: “Adding Virgin Media to our large and growing European operations is a natural extension of the value creation strategy we’ve been successfully using for over seven years.
“Virgin Media will add significant scale and a first-class management team in Europe’s largest and most dynamic media and communications market. After the deal, roughly 80% of Liberty Global’s revenue will come from just five attractive and strong countries – the UK, Germany, Belgium, Switzerland and the Netherlands.”
The deal could also see old rivals, John Malone and Rupert Murdoch, square up for another fight according to analysts. “In the near term it will make the UK the ring for a straight slug fest between two global pay-TV heavyweights as they battle for UK fixed broadband, fixed voice and pay-TV subscribers,” says to Adrian Drury, principal analyst at Ovum.
Malone has cable operations in 13 markets, leverage with the major studios and sports federations and has recently launched ‘Horizon’, a next generation pay-TV and multi-screen platform. However, the Murdoch owned BSkyB is a hugely successful player with a strong technology platform strategy, some powerful content rights and control of the Premiership coverage.
Commenting on the takeover, Virgin Media CEO Neil Berkett, who will eventually step down, said: “Over the past six years, Virgin Media has transformed the digital experience of millions of customers. We have catalysed a deep-rooted change in the UK’s digital landscape and delivered impressive growth and returns for our shareholders. I’m confident that this deal will help us to build on this legacy.
“Virgin Media and Liberty Global have a shared ambition, focus on operational excellence and commitment to driving shareholder value. 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.”
Asked what the practical implications were for the move, Nigel Walley, Managing Director of Decipher, the media strategy consultancy, said CableTV is an industry in which it’s very hard to find economies of scale that justify this kind of takeover outside of movie and archive TV acquisition.
“The key area that everyone is going to be looking at is set top box and software strategy,” Walley said. “Currently [Liberty Global’s consumer brand] UPC and Virgin run conflicting strategies. UPC has created a bespoke system called Horizon, based on the NDS ‘Snowflake’ software.
“Virgin have partnered with Tivo to create a new front end for their VOD service. There are similarities between them, and both are consistent with a move towards repositioning set top boxes as ‘home media servers’. However, it’s unlikely that UPC would want to run two separate standards and format.
“UPC is currently assessing the challenge of upgrading its installed base of 8 million European homes to Horizon. In that context, upgrading the 4 million Virgin homes to Horizon doesn’t sound a huge challenge.”