Report: Worst to come for Virgin Media

Empty

LONDON -- Nasdaq-listed Virgin Media could lose as many as 400,000 cable TV subscribers as a result of its channels dispute with satcaster British Sky Broadcasting, according to a new survey by media analyst UBS.

The U.K.'s biggest cabler failed to reach a carriage deal with BSkyB this year and saw Sky's basic entertainment channels dropped in a messy public dispute after chief executive Steven Burch accused Sky of asking for too much cash to renew carriage deals for channels including Sky One and Sky News.

Based on the results of an independent survey carried out by research agency GfK, UBS Investment research analyst Daniel Kerven said the bulk of damage to Virgin's business was still to come.

"In our view, Virgin would have been better off accepting Sky's offer of a £16 million ($31.7 million) increase in the cost of these channels, and would still be better off accepting Sky's most recent offer of £35 million ($69.4 million) per annum, or a £13 million ($25.8 million) increase," the UBS report said.

The decision to drop the channels appeared to have backfired in Virgin's last set of results, which saw more than 40,000 cable subscribers quit its much-vaunted "quadruple pay" service in the first quarter despite a £25 million ($49.6 million) marketing campaign. Over the same period, Sky attracted 51,000 net new subscribers.

"Our survey strongly suggests that Sky customers do not see Virgin as a credible alternative, while 45% of Virgin customers would rather take Sky," Kerven said in an investment note. "Virgin appears to have underestimated the value of Sky's basic channels, with our survey indicating up to 400,000 subscribers could switch to Sky."

The cable company formerly known as NTL was rebranded Virgin Media after entrepreneur Richard Branson merged his Virgin Mobile telephony business with it last year, becoming the biggest shareholder. Company officials could not be reached for comment.

Branson led an aggressive public campaign to woo viewers to the service, including an advertising campaign fronted by Uma Thurman.
comments powered by Disqus