NTL Inc., Britain's biggest cable operator, is importing a seasoned Comcast Corp. executive as its CEO as it prepares to digest an acquisition and gears up its attack against the 800-pound gorilla in the United Kingdom's TV market, Rupert Murdoch.
Last week, NTL appointed Stephen Burch, a 17-year Comcast veteran, as president and CEO, replacing Simon Duffy. Duffy was named NTL executive vice chairman.
Burch most recently served as president of Comcast's Atlantic division, and played an instrumental role in Comcast's integration of AT&T Broadband. That experience will be valuable at NTL.
Burch and NTL executives couldn't be reached for comment last week.
GETTING AGGRESSIVE
But in recent weeks, NTL officials have made it clear they're stepping up their efforts — via mergers and acquisitions — to grow and more aggressively compete against the dominant TV provider in the U.K., Murdoch's British Sky Broadcasting plc.
In addition to Burch's hire, the latest linchpins in NTL's strategy include: merging with British cable operator Telewest Global Inc.; being able to create a so-called “four-play” offer via the planned purchase of wireless provider Virgin Mobile Holdings PLC; rebranding by using the Virgin name and bidding against Murdoch to drive up costs for sports programming across the pond.
Whether NTL's efforts succeed in taking market share from Murdoch remains to be seen, according to analysts, but they will certainly spice up the battle — particularly NTL's $1.45 billion bid for Virgin, controlled by entrepreneur Richard Branson.
“We view [the] strategic benefits as a game-changer in the highly competitive U.K. communications market.” UBS Warburg analyst Aryeh Bourkoff wrote in a recent report.
At a round of investor conferences in New York earlier this month, NTL chairman James Mooney appeared instead of Duffy, sparking speculation that something was afoot at the cable operator, according to Oppenheimer & Co. analyst Thomas Eagan.
“Plus the fact that listening to Mr. Mooney, he seemed to imply a lot about change,” Eagan said. “He spoke a lot more aggressively about the company making their numbers, hitting their guidance, which just said to me there's going to be a change here.”
Having an outsider like Burch in charge during the merger of NTL and Telewest might make the process easier, according to Eagan.
NTL's deals for both Virgin and Telewest, with 1.3 million video subscribers, are evolving. Last week, NTL revised its agreement, making it a reverse merger, so that effectively, Telewest will acquire it. And NTL has refused to increase its initial bid after it was rejected by Virgin Mobile's board.
But last week, Virgin majority shareholder Branson appeared amenable to taking a lower price for his stake so NTL could pay more to disgruntled minority shareholders.
With the addition of Virgin Mobile, NTL would have video, voice, data and wireless to package together — similar to what four major U.S. cable operators are doing through a joint venture with Sprint Nextel Corp.
The Virgin acquisition will “bolster NTL's bundle, enhancing its competitive positioning with wireless, and would enable the use of a powerful global brand,” Bourkoff wrote.
NTL isn't the only bundler. BSkyB is buying Easynet Group plc, an Internet provider, so it can offer a triple play of data, video and voice
NTL is expected to brand its services with the Virgin moniker.
“Taking on the Virgin name may be more important, ultimately, than being first or early to market with the quadruple-play offering,” said Katherine Smith, Hoover Inc.'s business analyst. “In the U.K., it's well-loved and well-respected, and it has a better reputation as far as customer service is concerned — all of which NTL is fully aware of.”
Still, some financial analysts question how big of an impact a NTL quadruple-play will have against BSkyB .
“Effectively, we're trying to figure out if a very bundled offering trumps a very dominant uni-product,” said Neil Begley, a media analyst for Moody's Investors Service.
Having the quadruple play is more of an edge in the States because there's “such an even playing field in terms of content” on the video side among U.S. distributors, according to Begley, pointing out that cable penetration is stalled at under 40% in Britain. BSkyB has 7.8 million subscribers in the United Kingdom and Ireland, while NTL has 1.9 million video customers.
Murdoch's lock-hold on U.K. sports content, namely soccer's English Premier League, could be ending. Earlier this year, the European Commission ruled that BSkyB, which has controlled nearly all Premier League games, would lose that monopoly in 2007. Games are expected to be split into six packages, and no single bidder will be allowed to win more than five of the six packages.
Mooney, speaking at the UBS Warburg Global Media conference Dec. 7, said NTL believes it will be the successful bidder for three of the six packages. He added that the right bidding strategy could help drive up the cost for BSkyB.
PLAUDITS FROM BSKYB
For its part, BSkyB has tried to cast the potential competition from NTL and Virgin in a positive light.
“Sir Richard Branson's interest in cable recognizes the growth potential that Sky sees in the overall U.K. market for pay TV, broadband and related services,” BSkyB spokesman Robert Fraser said.
Smith said Murdoch shouldn't underestimate the competition. “From the numbers alone, BSkyB has got to be concerned,” she said. “NTL [including phone] had more than 3 million customers of its own before it agreed to acquire Telewest, which will bring almost 2 million more. Virgin Mobile itself has more than 4 million. So if all the deals go through, the combined company is expected to have more customers than BSkyB, with more services to sell them, at least until BSkyB ups its offerings.”
Mike Farrell contributed to this story.
