US billionaire John Malone’s cable group, Liberty Global, is in talks with Virgin Media about a possible deal with Richard Branson’s UK cable company, according to a news report.
The Financial Times reports that Liberty is lining up a potential takeover of Virgin, behind BSkyB as the UK’s second biggest pay-TV business.
Virgin confirmed that the two sides are talking about a “possible transaction”.
A deal would pitch Malone in direct competition with Rupert Murdoch, whose media empire owns 39% of BSkyB.
The two mens’ business interests clashed a decade ago when Murdoch’s News Corp and Liberty Media vied for control of DirecTV Group, the largest US satellite TV broadcaster.
Virgin Media said in a statement: “Virgin Media confirms that it is in discussions with Liberty Global, a leading international cable company, concerning a possible transaction.”
BSkyB leads the UK pay-TV market with 10.7 million customers compared with Virgin’s 4.9 million.
Virgin Media’s main listing is in the US but it has a smaller one in London, where the shares were up 14% at midday. BSkyB shares were down 1%.
According to Adrian Drury, principal analyst at Ovum this could be the largest shake-up in the UK 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 UK 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 UK 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 multi-screen 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 UK 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 UK telcos trying to solve their triple play pay-TV challenge , such as Talk Talk and BT.”
