Liberty Global eyeing up Virgin Media

International cable operator and media company Liberty Global is in talks with Virgin Media to buy out the UK-based cable operator and mobile service provider in a deal that could shake up the UK market.

Virgin Media operates a nationwide cable, fibre and ADSL network competing with incumbent BT in the consumer space, an enterprise focused business solutions arm, and a highly successful MVNO.

Liberty has internet operations in 11 countries in Europe and TV assets in the US and Australia.

According to Adrian Drury, principal analyst at Ovum, this could be the largest shake-up in the UK telecoms and media sector since the merger of T-Mobile and Orange UK 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 will have a pan European triple-play business, and the competitive need to fight News Corp at this scale, 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. Depending on how Malone might chose to leverage the Virgin Mobile asset, it may also spill over in consumer mobile services.

“Malone will bring the operational smarts from cable operations in 13 markets, multi-territory leverage with the major studios and sports federations, plus its recently launched Horizon next generation pay-TV and multi-screen platform, now rolling out across its European operations. But it will be facing off against a jewel in the Murdoch empire. BSkyB, by any measurement is one of the best-run pay-TV operations on the planet, with a strong technology platform strategy, some powerful content rights, including exclusive rights to the entire HBO catalogue, control of the Premiership coverage wholesale market, and exclusivity on the output of all of the majors in the First Subscription Pay-TV Window.

“Plus also note that the UK is a must win market for two major disruptive SVOD players, Amazon’s Lovefilm and Netflix. If Malone closes the deal, this will be a very interesting competition to watch and real test for the Liberty vision of the future of cable TV and internet services. Also expect that there would be some collateral damage, potentially other UK telcos trying to solve their triple play pay-TV challenge , such as Talk Talk and BT.”

Virgin Media announces its full year 2012 results on Wednesday, where more information could be revealed.

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