Virgin rocks City with £821m NTL bid

Sir Richard Branson could receive a 12-15 per cent share in the new company

Cable operator NTL has confirmed that it has approached Virgin Mobile regarding a potential offer to combine the two companies in a move that could give it a so-called 'quadruple play' to offer phone lines, TV, broadband and mobile services.

NTL currently has a licence agreement with Virgin Enterprises for the exclusive use of the Virgin brand in the broadband market, and is in discussions with Virgin Enterprises to extend that licence to cover television, fixed line and mobile telephony.

If the proposed £821m deal goes through, NTL would use the Virgin brand to sell all its services.

Sir Richard Branson could receive a 12-15 per cent share in the new company, making him the largest shareholder in the group which would have 3.3 million cable TV customers, 2.5 million broadband internet customers, 4.3 million fixed phone customers, and five million mobile customers.

The news comes hot on the heels of NTL's merger with Telewest to create a single unified cable operator in the UK.

Jerome Buvat, managing consultant at Capgemini Telecom, Media and Entertainment, said: "This move is largely defensive. NTL is facing growing competition from digital terrestrial TV and from BT launching TV over DSL and the likely similar moves from local loop unbundlers which will also limit NTL's growth in the TV market.

"Meanwhile Virgin Mobile is also facing tough competition in the mobile space from new entrants and incumbents.

"Tesco Mobile, for example, added more customers than Virgin in the first nine months of the year: 185,000 vs. 122,000 for Virgin. Virgin also saw its churn increase from 22.6 per cent in 2004 to 24 per cent in 2005."

Analyst firm Ovum stated: "This deal, if it comes off, represents an exceptional opportunity for Richard Branson to extend his Virgin brand into the heart of the UK's television and entertainment market.

"At the same time, the Virgin brand will have a lot more customer appeal than the NTL or Telewest brands, both of which have suffered from customer service problems.

"However, Virgin Mobile mostly has low-spending pre-pay customers who are not well suited to conversion to a quad-play contract."