US takeover sets up Virgin as ‘disruptive challenger’

VIRGIN Media vowed to become a “disruptive challenger” in the pay-TV market today after agreeing a £10 billion takeover by US cable giant Liberty Global.

Virgin Media have agreed a £10 billion takeover by US cable giant Liberty Global.
Virgin Media have agreed a £10 billion takeover by US cable giant Liberty Global.

The deal marks a breakthrough into the UK market for Colorado-based billionaire investor John Malone, whose Liberty empire will span 14 countries and have 25 million customers after taking on Britain’s second biggest pay-TV company.

It will make him a direct rival of Rupert Murdoch’s News Corporation, the company which owns 39% of pay-TV market leader BSkyB and was once 18% owned by Mr Malone.

Virgin Media, which was created out of the mergers of NTL, Telewest and Virgin Mobile, employs 14,000 people in the UK, including at offices and call centres in Swansea, Birmingham, London, Glasgow, Manchester and Bradford.

No customer-facing jobs are expected to go under plans by Liberty Global to save 180 million US dollars (£115 million) across its business.

Virgin Media chief executive Neil Berkett, who will leave the company following the completion of the deal, today said Virgin would become a “disruptive challenger” to its rivals, which include BT and Sky in the UK, but would not be competing for entertainment and sports rights such as Premier League football.

Mr Berkett said: “The combined company will be able to grow faster and deliver enhanced returns by capitalising on the exciting opportunities that the digital revolution presents, both in the UK and across Europe.”

Liberty Global has pay-TV operations around the world and is the largest cable operator in most of its 11 European markets, including Ireland.

After the deal, roughly 80% of Liberty Global’s revenue will come from five countries - the UK, Germany, Belgium, Switzerland and the Netherlands.

In its full year results today, Virgin Media reported the net addition of a record 88,700 cable customers last year, up from 5,500 the previous year. In the last three months of last year it secured 62,700 new broadband customers, compared with 30,000 the previous year.

Operating income was £699.1 million in the year to December 31, up from £540.2 million the previous year, having seen a 2.7% jump in revenues to £4.1 billion.

Liberty Global said the stock and cash merger, which is subject to shareholder approval, was valued at approximately 23.3 billion US dollars (£15 billion) when including debt. The deal values New York-listed Virgin’s shares at 16 billion US dollars (£10.1 billion).