Press Release Summary = A merger would integrate mobile and fixed-line phone service, broadband, and TV. But do British consumers want a one-stop shop?
Press Release Body = The ink wasn\'t yet dry on NTL\'s merger with rival British cable operator Telewest when the former stunned the market on Dec. 5 with an audacious $1.4 billion bid for Virgin Mobile (VGMHF). Founded by Sir Richard Branson\'s Virgin Group in 1999, Virgin Mobile is now Britain\'s largest mobile virtual network operator, with 5 million subscribers. Branson\'s Virgin Group, which owns 72% of Virgin Mobile, will emerge with a seat on the new company\'s board and a shareholding of 14%, making Virgin the single biggest shareholder.
If consummated, the deal will create a powerhouse in the rapidly converging telecom and media industries, all under the Virgin brand. \"This move could change the landscape in Britain, where it is one of the most significant telecom deals we\'ve seen in the last five years,\" says Bob House, senior vice-president with telecom consultancy Adventis in London. \"This gives NTL a breadth that, at the moment, no one else can match.\"
COMPETITIVE EDGE. The deal promises to intensify competition in Britain, where it will give the new company an edge over rivals such as telecom giant BT Group (BT) and Rupert Murdoch\'s satellite broadcaster BSkyB. While BT has recently introduced BT Fusion, a mobile phone service that works on both fixed and mobile networks, it does not yet offer the full range that NTL is planning. Similarly, BSkyB recently acquired broadband provider Easynet, but it is not able to offer customers mobile phone service.
\"This allows NTL to offer voice and potentially other entertainment services such as mobile TV over a mobile phone network through Virgin, enabling them to add another technology platform and another set of products to their offering,\" says Ian Fogg, senior analyst at Jupiter Research in London.
For NTL, the deal offers other benefits. The cable operator, which is already in the process of merging with rival Telewest to create a $5.9 billion giant, will gain access to the Virgin brand, whose image as hip and offering good value plays well with younger customers. \"The Virgin brand gives the new company credibility,\" says Julian Hewett, chief analyst at IT and telecom consultancy Ovum in London. It will also give NTL badly needed customer service expertise, something Britain\'s cable operators are sorely lacking.
THREE-YEAR HORIZON. Analysts say there is no real evidence -- at least in Europe -- that any one company has come up with the killer offering. Lastly, while it will be relatively easy sell to bring Virgin mobile to NTL\'s existing customers, it might prove tougher convincing Virgin\'s predominantly lower-spending prepaid users to sign up for the quadruple play offering.
There\'s no doubt that, if agreed upon, the deal will take at least two years to three years before it is fully integrated. In the meantime, cable, telecom, and broadcast companies the world over are watching.
2022
