NTL launches audacious bid

Fresh from its £3.8bn merger with rival British cable operator Telewest, NTL has stunned the market with an audacious takeover bid for Virgin Mobile.

Fresh from its £3.8bn merger with rival British cable operator Telewest, NTL has stunned the market with an audacious takeover bid for Virgin Mobile.

The deal will potentially create a powerhouse in the rapidly consolidating media industry, says Kerry Capell in BusinessWeek. The new company would have a market capitalisation of £4.5bn and more than nine million customers. Richard Branson is set to swap his 72% stake in Virgin Mobile for a 14% stake in the enlarged group and a seat on the board. He will also benefit from a hefty £10m annual licensing deal for the Virgin brand.

But not everyone is convinced: past attempts at creating converged media giants have met with failure, says Alex Brummer in the Daily Mail, citing AOL-Time Warner and Vivendi Universal.

The success of the plan, analysts say, depends on the success of the next generation of mobile handsets that will switch between fixed line and mobile networks. This will form part of the so-called "Quadruple play" the industry's "Holy Grail", says Capell, with which NTL will offer a combination of fixed and mobile telephones with internet and pay-television: all under the Virgin brand. It may still be 18 months away from becoming reality, but it will be the first comprehensive service in Britain.

The deal should appeal to customers, as NTL will be able to undercut rivals, thanks to the synergies of a joined-up service. The appeal for NTL, sometimes known as "NT Hell", lies in the Virgin brand, says Lex in the FT. Any deal would allow the company to consolidate three firms under a highly regarded consumer brand.

But the challenge of integrating the three entities of NTL, Telewest and Virgin is a risk in itself. All three will be operating in highly competitive sectors; giants such as BSkyB and BT are eyeing the same territory.

The new company will have to work out ways to generate value from convergence and nobody has yet come up with a killer idea of how to do this, say Businessweek. Also, while it may prove easy to sell Virgin mobile to NTL's existing customers, it might be tougher convincing Virgin's lower-spend pre-pay users to sign up for the quadruple play, says Capell.

Recommended

Larry Fink: the undisputed king of Wall Street
People

Larry Fink: the undisputed king of Wall Street

Larry Fink survived two big financial crises and went on to build a massive asset manager, doing for investing what Henry Ford did for cars. He has hi…
23 Oct 2021
Bernard Tapie: the man with a thousand lives
People

Bernard Tapie: the man with a thousand lives

Bernard Tapie, who has died aged 78, was a colourful French entrepreneur, star of screen and stage, politician, sports icon, press baron and convicted…
10 Oct 2021
Xu Jiayin: the tycoon behind Evergrande
People

Xu Jiayin: the tycoon behind Evergrande

Xu Jiayin became a wheeler-dealer in China’s muddled transition to capitalism and his connections helped him to enormous riches. Now, he seems to have…
2 Oct 2021
The legacy of Angela Merkel
People

The legacy of Angela Merkel

German leader Angela Merkel is leaving office to spend more time with her family after 16 years at the helm. But what has she got to show for it?
1 Oct 2021

Most Popular

How to invest as we move to a hydrogen economy
Energy

How to invest as we move to a hydrogen economy

The government has started to roll out its plans for switching us over from fossil fuels to hydrogen and renewable energy. Should investors buy in? St…
8 Oct 2021
Properties for sale for around £1m
Houses for sale

Properties for sale for around £1m

From a stone-built farmhouse in the Snowdonia National Park, to a Victorian terraced house close to London’s Regent’s Canal, eight of the best propert…
15 Oct 2021
How to invest in SMRs – the future of green energy
Energy

How to invest in SMRs – the future of green energy

The UK’s electricity supply needs to be more robust for days when the wind doesn’t blow. We need nuclear power, says Dominic Frisby. And the future of…
6 Oct 2021