Print this article
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.
Published in
News & charts
| More
articles
by
Harry Stourton
Related articles
-
Feb 02, 2012
-
Jan 30, 2012
FREE - MoneyWeek's daily investment email
Our free daily email, Money Morning, is an informative and enjoyable analysis of what's going on in the markets. Written by our Editor, John Stepek, and guest contributors.
Sign up FREE to Money Morning here.