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Virgin Media Sale Speculation - Update
By: MarkJ - 03 July, 2007 (8:35 AM)

UK cable giant Virgin Media has finally issued a formal statement in response to yesterdays sale reports (here):

Virgin Media Inc. announced today that it has received a proposal to acquire 100% of the common stock of the Company. The Company has not engaged in negotiations with the offeror. The proposal is based on public information and is subject to various conditions, including a due diligence examination and a period of exclusivity. The proposal also states that it will be withdrawn if its terms are publicly disclosed.

Prior to the receipt of the proposal, the Company’s Board of Directors had initiated a review with Goldman Sachs of strategic alternatives, including a process for a possible sale of the Company. The proposal will be considered as part of the review. However, there is no assurance that any transaction will occur or, if so, at what price. The Company does not intend to comment further on the process unless and until a definitive agreement is executed or the process is abandoned.

Naturally the news could cause more interested buyers to come out of the woodworks, but will Virgin decide to sell? Certainly there's been no shortage of comment from the industry, a couple of which are quoted below and both carry pro's and con's:

Jason Lloyd, head of broadband at moneysupermarket.com, comments on the potential sale of Virgin Media:

"The potential sale of Virgin Media, including Virgin Mobile, is an interesting development. The launch of the converged communication group did not start well with Virgin losing customers in its first few months due to its battle with Sky, which removed its free tv channels. This news though could drive some excellent deals as Virgin may switch into an aggressive acquisition mode to boost subscriber numbers.

"But in the longer term, if Virgin Media is taken over by a private equity group, the investors may look to cut costs, maximise efficiencies and squeeze every last penny from customers. Subscribers might also see service levels dipping as private equity groups have often sacrificed customer service to reduce costs. If so, this could signal the end of Virgin’s value and customer service offerings; its key strengths in a market packed with average service.

Aamir Baloch, director of firsthelpline.com:

The news that Virgin Media has effectively put itself up for sale will bring uncertainty for a lot of people, and in the short-term, questions will be raised about whether seeing this deal through will take senior managers’ eyes off the ball in terms of delivering competitive products with a quality service – they currently have 3 million TV customers, 3.4 million broadband customers, 4.5 million mobile phone subscribers and 4.1 million home phone customers. However, renewed investment, focused management, and the removal of the scrutiny of quarterly reporting should mean the company can come back stronger, with improved customer service and media services, helping it to take on Sky and BT and be a strong contender in the market.

“Ultimately, this move should be good news for consumers, though the short-term uncertainty and lack of customer focus may still lead to customer defections.


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