Virgin Q4 down as Sky row continues

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LONDON -- Virgin Media has offered to invite a third party to arbitrate its deadlocked negotiations on carriage deals with satcaster BSkyB, the company said Wednesday.

The move, which has been rejected by the Rupert Murdoch-controlled satcaster, came as Virgin Media unveiled lackluster fourth-quarter results that saw net losses more than double to £122 million ($239.3 million) from £56.2 million last year.

More damagingly, more than 37,000 customers quit the combined television, Internet and telephony service over the period as churn rates (the percentage of customers quitting per month) rose from 1.4% to 1.7% year to year.

Total revenue in the fourth quarter doubled to £1.1 billion ($2.2 billion) following the consolidation of former rival cabler Telewest and the acquisition of cell phone operator Virgin Mobile last year. But costs over the period rose to £1.1 billion from £519 million, reflecting the acquisitions.

Virgin Media CEO Steve Burch maintained that the performance of the underlying business was "on track" as the former NTL re-branded to become Virgin Media, and said it will provide "great opportunity" for consumers.

"Consumer reaction to the re-brand, announced on Feb. 8, has been very encouraging," Burch said. "Our re-brand, and the ongoing improvements to our business that it reflects, signal a great opportunity for our customers and investors and poses a serious challenge to our competitors."

His comments came as the damaging row between Britain's two largest pay TV operators showed no signs of being resolved, and looked set to see Sky's entertainment channel portfolio dropped by Virgin's 3 million cable TV homes when the current contract expires at midnight Wednesday.

"We have offered them a binding arbitration process covering both the Sky basics and Virgin Media Television channel carriage contracts and are awaiting their response," the company said in a statement Wednesday.

But Sky responded by calling the offer a "distraction" and said it was prepared to go directly to Virgin subscribers with an offer of their channels for just 3p (6 cents) per day "at no cost or risk" to the cable group.

This prompted a furious response from the Virgin Media CEO, who said it was a "blatant attempt" to hijack Virgin's proprietary network.

"It's a bold-faced attempt to take our network from us. It's a ludicrous proposal and they know it's ludicrous," Burch told reporters on a conference call. "We are not going to let them steal our network, they're far more dominant than they should be. It's a ridiculous request."

If a deal cannot be struck, Virgin viewers will lose access to Sky One, Sky 2, Sky 3, Sky News and Sky Sports News, in a deal thought to cost the satcaster more than £45 million ($88.3 million) a year.
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