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Liberty Global in buyout talks with Virgin Media

Deal would mark Liberty's biggest move yet into the UK

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Virgin Media has confirmed reports that is in buyout talks with US cable giant Liberty Global.

“Virgin Media confirms that it is in discussions with Liberty Global, a leading international cable company, concerning a possible transaction,” Virgin said in a statement to the City ahead of it full-year results tomorrow.

“Any such transaction would be subject to regulatory and other conditions. A further announcement will be made in due course.”

Shares in Virgin Media jumped almost 15 percent on the London Stock Exchange immediately after the announcement was made, giving the company a market capitalisation of about £7.6 billion. Reports suggest that its enterprise value could be as high as $20 billion (£12.7bn).

Liberty Global is run by US billionaire John Malone and is the second biggest telco in the world. The company operates in 13 countries and has 19.6 million subscribers to its television, broadband and telephony products. Its consumer brands include UPC, Unitymedia, Kabel BW, Telenet, and VTR.

Most of Liberty's customers are in Europe. However, the deal would mark the company's biggest move yet into the UK and would put Malone in direct competition with his former partner and long-time rival Rupert Murdoch, whose company News Corp controls BSkyB.

Commenting on the news, Adrian Drury, principal analyst at Ovum, said this could be the largest shake-up in the UK telecoms and media sector since the merger of the T-Mobile and Orange 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, 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,” said Drury.

“Depending on how Malone might chose to leverage the Virgin Mobile asset, it may also spill over in consumer mobile services.”

Virgin Media was formed in March 2006 by the merger of NTL and Telewest. The company provides fixed and mobile telephone, pay-TV and broadband internet services to businesses and consumers in the United Kingdom.

As of 30 September 2012 Virgin Media had a total of approximately 4.9 million cable customers, of whom around 3.8m were supplied with its television services, 4.2m with broadband internet services and 4.2m with fixed-line telephony services. It also had around 1.7m mobile customers.

This is not the first time the company has sought a buyer. Back in 2007, Virgin Media appointed investment bankers in an effort to attract buying interest from US and international cable companies – including Liberty Global.

The company did not say whether the potential buyout would include its business division, Virgin Media Business, which offers services such as secure VPNs, mobile backhaul and business cloud computing, and claims to carry about 35 percent of all business broadband traffic in the UK.

When the business division launched in 2011, Virgin Media executives emphasised the company's ability to offer competitive prices to enterprises by making use of capacity on the consumer network which was largely unused during working hours.

The company's latest results revealed that the business unit's year-on-year revenue was up 9.5 percent to £168.6 million for the third quarter – greatly exceeding that of the overall Virgin Media group.


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