America’s cable giant Liberty Global has agreed a $23.3bn takeover of Virgin Media, Britain’s No. 2 pay-TV operator. The deal will make Liberty Global, owned by John Malone – nicknamed Cable King, or Darth Vader, thanks to his stranglehold on US cable – the world’s top cable provider. It will also pit Malone directly against his old sparring partner Rupert Murdoch in the fight for British broadband and pay-TV customers.
What the commentators said
“This is a consolidation play in a market that lends itself to gigantism,” said Jonathan Guthrie in the FT. Liberty has a large presence in continental Europe but no footprint in Britain, and Virgin Media inherited the “top-notch UK network created by NTL”.
The British market is also more appealing than ten years ago, the last time Malone “came sniffing around”, added Renée Schultes in The Wall Street Journal. Virgin Media has just reported its first profit and pay-TV firms are starting to push up prices.
Then again, said Schultes, there may not be much more Malone can do to beef up Virgin’s revenue growth. Virgin already has a 40% market share among the 50% of houses that its cable network passes. Almost 66% of customers already buy a package of pay TV, broadband and landline phones.
Moreover, Virgin Media will now have more debt, which reduces the scope for spending money on investment or promotions. So no wonder BSkyB and BT’s shares “took the news calmly”, said Lex in the Financial Times.
Malone may be playing a long game, as Andrew Edgecliffe-Johnson pointed out in the FT. Virgin’s £5bn of previous tax losses would be very valuable if they could be offset against the profits of another British business. Indeed, stage two of Malone’s plan may be to take over ITV.