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Summary:

The combined operation will have 25 million customers in 14 countries. It will also take John Malone’s Liberty Global head-to-head with Rupert Murdoch and BSkyB.

Virgin Media

The cable giant Liberty Global has bought UK-based Virgin Media in a cash-and-stock deal worth $23.3 billion, creating what they claim is “the world’s leading broadband communications company” with 25 million customers across 14 countries.

That “world’s leading” tag is debatable, as China Telecom claims more than 90 million broadband subscribers, but this is nonetheless a big deal, taking the combined operation way past the likes of Comcast (18.7 million subscribers). The operation will focus on “the strongest and most strategic markets in Europe”, delivering the triple-play hit of broadband, telephony and digital TV while also pushing mobility and B2B products.

Liberty Global CEO Mike Fries said in a statement:

“Adding Virgin Media to our large and growing European operations is a natural extension of the value creation strategy we’ve been successfully using for over seven years.

“Virgin Media will add significant scale and a first-class management team in Europe’s largest and most dynamic media and communications market [the UK]. After the deal, roughly 80 percent of Liberty Global’s revenue will come from just five attractive and strong countries — the UK, Germany, Belgium, Switzerland and the Netherlands.”

Europe is such a strong focus for the combined company that Liberty Global will “redomicile” from Delaware to the UK, although its headquarters will stay put. The company will continue to be Nasdaq-listed, although it may list on a European stock exchange as well. Virgin will hang onto its brand.

The implications of this deal could be wide-ranging. It will certainly bolster Virgin’s chances in the UK pay TV market against Rupert Murdoch and BSkyB.

Virgin also has a very good hybrid cable/fibre broadband network in the UK that was created out of the merger of NTL and Telewest half a dozen years ago. John Malone’s Liberty, previously a major shareholder in Telewest, had itself tried and failed to execute such a merger, so today’s deal is the culmination of a long-term ambition.

At the same time, it also seems to be about taking advantage of Virgin Media’s tax losses and low interest rates, according to sources referred to by the Financial Times.

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  1. Could we see yet another round of consolidation?

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