Search This Blog

woensdag 6 februari 2013

Sky dominance challenged by Liberty-owned Virgin

Liberty Global's deal to buy UK cable TV giant Virgin Media is expected to provide the sternest challenge yet to the dominance of Sky, as well as restart hostilities between two billionaires.

Virgin Media has been acquired by Liberty Global - chaired by John Malone - in a $16bn (£10.22bn) deal. The US firm will use cash and stock for the deal, and pay $47.87 per Virgin Media share, representing a 24% premium on Monday's closing price.

Liberty Global, which owns a range of international TV and broadband operations, including Irish cable operator UPC and content distributor Chellomedia, will continue to use the Virgin Media brand in the UK.

Founder of the Virgin Group, Sir Richard Branson, said: "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 closed 2012 with 4.9 million customers for its services, but main rival Sky has over double that, at 10.7m customers.

Satellite TV giant Sky has Rupert Murdoch's News Corp as its biggest single shareholder, with a 39.1% stake. The firm has experienced huge growth over the years and recently snapped up a new deal to the lucrative Premier League rights.

However, a Liberty-owned Virgin Media could provide a sterner challenge for Sky in the pay-TV market.

Following the takeover, Liberty Global will become the world's leading broadband communications company, with a network covering 47 million homes. Its companies will have 25 million customers in 14 countries.

As Liberty already has a significant presence in Europe and cable networks, the deal will create instant synergy across 'triple play' products - TV, voice and broadband. It will also bring significant potential for cost savings across the combined group.

Liberty Global chief executive Mike Fries said that the group will be able to secure around $180m per year of cost savings due to the takeover. This is mostly by pooling purchasing across cable equipment and set top boxes.

The combined company will focus on the "strongest and most strategic markets in Europe", with 80% of its revenue to come from the UK, Germany, Belgium, Switzerland and the Netherlands.

Liberty Global will also benefit from Virgin's presence in mobile and business-to-business communications.

Virgin Media chief executive Neil Berkett said: "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."

The takeover renews rivalries between Liberty's John Malone and Rupert Murdoch, the chief executive of News Corp.

The billionaire unsettled Murdoch in 2004 by amassing a 17% stake in News Corp, challenging the Murdoch family's grip over the company.

The dispute was eventually ended after News Corp agreed to sell its stake in US satellite TV broadcaster DirecTV to Malone, who in turn offloaded his News Corp shares.

Malone has eyed a move into the UK for some time, and built up a 25% stake in Telewest before it merged with NTL. The group later joined with Virgin Communications to form Virgin Media.

He can now use Virgin Media and its ready-made customer base and considerable network assets to challenge the dominance of Murdoch's Sky in the lucrative UK market.

But Fries played down expectations that Virgin would compete with Sky for prestige content rights, such as live football.

He told the Financial Times: "I do not see us doing anything in this market that's meaningfully different from what Virgin's been doing with respect to premium content."