Analysts Discuss Liberty Global's Deal for U.K.'s Virgin Media, Effect on BSkyB

U.K. cable operator Virgin Media reported on Wednesday that it ended 2012 with 3.795 million pay TV subscribers as analysts chimed in on its sale to John Malone's Liberty Global.

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The Virgin Media acquisition "would complete Liberty’s cable empire and cause a new headache for [satellite TV giant] BSkyB," in which Rupert Murdoch's News Corp. owns a 39 percent stake, said Informa analyst Ted Hall. "If a deal goes ahead, the long-time number two cable operator and dominant European player will overtake U.S. giant Comcast to become the world’s largest cable [operator]."

Comcast had 22 million pay TV customers as of the end of the third quarter of 2012. Liberty Global had 18.3 million, and Virgin Media had nearly 3.8 million.

Addressing Liberty's and Virgin's growth opportunities for the U.K., he said "Liberty would be taking on one of the most feared competitors in all of pay TV, BSkyB, with the renewal of an on-off rivalry between Liberty chairman John Malone and former business partner and News Corp. chief Rupert Murdoch providing an interesting subplot."

He added: "The path to growth here would be in increasing its broadband base, selling more bundled packages and upselling TV and broadband customers to high-end/high-speed services."

UBS analyst Polo Tang was less concerned about the Virgin/Liberty competition for BSkyB. "While there may be fears that new ownership of Virgin Media could lead to increased competition for BSkyB, we think the status quo is likely to remain and that the main battle in the U.K. triple-play market is between BSkyB and [telecom giant] BT," he said in a report.  

Virgin Media on Wednesday also reported  fourth-quarter earnings of $4.16 billion (2.66 billion pounds), compared with $75.5 million (48.2 million pounds) in the year-ago period. Revenue rose minimally to $1.63 billion (1.04 billion pounds).

The company signed up 17,100 new pay TV and 101,200 total subscribers in the fourth quarter. That meant it ended 2012 with 4.89 million total customers, up from 4.81 million a year earlier. Virgin's pay TV subscriber base rose from 3.76 million to 3.795 million.

Meanwhile, Bloomberg News reported that Virgin founder Richard Branson stands to reap $316 million from the Liberty Global acquisition of Virgin Media. He owns 6.6 million Virgin Media shares.

Email: Georg.Szalai@thr.com
Twitter: @georgszalai