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Last Updated: Monday, 5 December 2005, 14:51 GMT
Can NTL be made an on-demand Virgin?
Analysis
By Tim Weber
Business editor, BBC News website

UK cable operator NTL plans to buy mobile phone firm Virgin, but can the 817m deal deliver for shareholders?

A whiff of spring is in the air. The spring of 2000 to be exact, when billion-dollar dotcom deals made the headlines and words like "convergence" and "multi-access" made investors giddy.

Sir Richard Branson
Sir Richard Branson is the majority shareholder in Virgin Mobile

Five years on and a long stock market slump later, we are being told to get excited again.

NTL's takeover of Virgin Mobile will "completely change the media and technology landscape", say people close to the deal.

The first "quadruple play service", they say, will combine mobile phones, fixed-line phones, broadband internet and television services. "Nothing like this has happened anywhere in the world."

I beg to differ.

What's the killer selling point?

Remember Vizzavi, the ill-fated alliance of Vodafone, Canal plus and Vivendi Universal, which promised to maximise customer reach by seamlessly joining up the worlds of mobile, online and television?

And what about the grandmother of all failed mergers, AOL and Time Warner? It was supposed to combine AOL's hip brand and large number of subscribers with the media giant's cable networks and off-line content.

Of course, both technology and consumer behaviour have moved on.

  • Digital television has landed
  • Broadband take-up is soaring
  • 3G telephony (currently crawling along at ISDN speed) will soon get a software tweak that will make it nearly as fast as the marketing people promised it would be.
However, that still leaves the key question unanswered. What is the unique selling point - content or delivery platform?

The industry is still groping for answers.

Platform providers such as NTL, BT and BSkyB are loading up on content (such as football rights) while extending their reach to other channels (mobiles and broadband).

Content providers such as Time Warner, ITV and the BBC are pondering how they can avoid being frozen out of platforms that they don't control.

On-demand world

It is an industry in motion.

Telecoms giant BT is losing customers fast, and hopes to make up the numbers by re-entering the mobile space and offering on-demand television through its broadband network some time next year.

BSkyB worries whether it can keep up subscriber numbers, squeezed in its core business by the success of the BBC-led digital Freeview platform, the resurgence of cable and the threat of Freesat - the planned free-to-view satellite service of ITV and BBC.

This is turning into an expensive battle for subscribers

Already BSkyB has bought broadband provider Easynet, and readied a billion pound war chest for its next move.

NTL, meanwhile, still faces the challenge of integrating the UK's other big cable network Telewest - a $6bn takeover announced just two months ago.

The deal was the final stitch bringing together the UK's patchwork of regional cable providers. But there are plenty of loose threads left, not least poor customer service (which earned NTL the nickname "NTL hell" on a website run by disgruntled customers).

The corporate uncertainty coincides with rapid technological change that allows consumers to watch and listen to programmes and other content on-demand and on-the-go.

Of course, it is far too early to pronounce the death of radio and television channels. And nobody quite knows which technology will deliver exactly what the audience wants.

But that's the very reason why all players - from BSkyB to the BBC, from Vodafone to NTL and Virgin - are worried and are jostling for position.

For the commercial players, it is turning into an expensive battle for subscribers.

Virgin brand on-demand

And that's where Virgin Mobile comes in.

Virgin logo
Can the Virgin brand stretch to cover NTL?

The company is a virtual network operator, using T-Mobile's phone network, and thus has precious few real assets.

But Sir Richard Branson's company has a quickly growing subscriber base, a good customer service team, and most importantly a good brand.

It is this brand that has allowed Virgin to target the young and the hip.

NTL hopes to piggyback on that success and rebrand itself as Virgin.

But are Virgin Mobile's young customers affluent and settled enough to buy NTL's premium cable television packages?

Will NTL/Telewest households buy into the Virgin brand and forget about NTL hell?

Cable firms have found it difficult enough to hawk their television and telephony packages, so one might question whether a quadruple sell will deliver.

Virgin, in turn, is under pressure from keenly-priced competitors such as Tesco Mobile.

In the end this deal is not about technology. It is about branding.

And investors - and Sir Richard - will have to ask themselves whether the ever-flexible Virgin brand can be stretched yet again.



SEE ALSO
NTL and Virgin in takeover talks
05 Dec 05 |  Business
Football deal ends BSkyB monopoly
17 Nov 05 |  Business
NTL seals $6bn Telewest takeover
03 Oct 05 |  Business
Cable firms offer video-on-demand
18 Jan 05 |  Technology
Virgin Mobile's user numbers jump
01 Feb 05 |  Business

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