Liberty Global agrees $23bn deal for Virgin Media

UK cable and TV firm Virgin Media is to be acquired by US firm Liberty Global in a deal worth £23bn.

Speculation had mounted on Tuesday that a deal was in the offing and on Wednesday morning it was confirmed by both firms, with Virgin Media shareholders to receive $17.50 in cash per share.

The move will pose a serious threat to Sky, TalkTalk and BT in the fixed broadband and TV content markets, as it will bring Liberty's global clout to the UK market.

"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," said Mike Fries, chief executive of Liberty.

"Virgin Media will add significant scale and a first-class management team in Europe's largest and most dynamic media and communications market."

The deal increases Liberty's scale to 25 million customers in 14 countries, where it offers TV, broadband and phone services, as well as business offerings.

Ted Hall, senior analyst at Informa Telecoms & Media, said that Liberty was likely to focus on broadband as its key strategy to boosting customer numbers, which could be a boon for the UK market.

"Virgin Media is a mature business, one that does not have analog subscribers to upgrade to digital and one that cannot rely on new-customer growth in a plateauing pay-TV market," he said.

"The path to growth here would be in increasing its broadband base, selling more bundled packages and upselling TV and broadband customers to high-end/high-speed services."

He added that it was likely overtime the Virgin Media brand would disappear from the market, although not for a few years.

"That an eventual name change would take place seems highly likely - UK cable has been subject to several brand changes over the years, none of which have hurt the incoming players' prospects," he said.

"Though there is some value in maintaining the highly recognisable Virgin Media brand for at least a short time, the emergence of another new identity could serve to reinvigorate the sector once again."