Liberty Global in Talks to Purchase Virgin Media

LONDON: Liberty Global is in discussions to potentially purchase Virgin Media, which is the second largest pay-TV provider in the U.K., after BSkyB.

“Any such transaction would be subject to regulatory and other conditions,” Virgin Media said in a statement confirming the talks. The move would put the telecommunications billionaire John Malone, who is the chairman of Liberty Global, head-to-head with his longtime rival Rupert Murdoch, the chairman of News Corp., which is BSkyB’s biggest shareholder.

According to Adrian Drury, principal analyst at Ovum, this could be the largest shake up in the U.K. telecoms and media sector since the merger of the T-Mobile and Orange UK mobile network operators in 2010. “While Liberty’s play for Virgin is likely to be driven by its long term vision for the value a foothold in the U.K. will have a pan European triple-play business, and the competitive need to fight News Corp. at this scale, in the near term it will make the U.K. the ring for a straight slug fest between two global pay-TV heavyweights, John Malone and Rupert Murdoch, as they battle for UK fixed broadband, fixed voice and pay-TV subscribers. Depending on how Malone might chose to leverage the Virgin Mobile asset, it may also spill over in consumer mobile services.

“Malone will bring the operational smarts from cable operations in 13 markets, multi-territory leverage with the major studios and sports federations, plus its recently launched Horizon next generation pay-TV and multiscreen platform, now rolling out across its European operations. But it will be facing off against a jewel in the Murdoch empire. BSkyB, by any measurement is one of the best-run pay-TV operations on the planet, with a strong technology platform strategy, some powerful content rights, including exclusive rights to the entire HBO catalogue, control of the Premiership coverage wholesale market, and exclusivity on the output of all of the majors in the first subscription pay-TV window. Plus also note that the U.K. is a must win market for two major disruptive SVOD players, Amazon’s LOVEFiLM and Netflix. If Malone closes the deal, this will be a very interesting competition to watch and real test for the Liberty vision of the future of cable TV and internet services. Also expect that there would be some collateral damage, potentially other U.K. telcos trying to solve their triple play pay-TV challenge, such as Talk Talk and BT.”