U.S.-owned Liberty Global has overtaken Sky as Europe’s largest pay TV group after its surprise acquisition of UK cable operator Virgin Media for $15.75 billion plus a further $9 billion of debt.
The deal, worth over $23 billion altogether, takes Liberty into Europe’s most profitable pay TV market, and means it is now present in 12 of the continent’s countries, including the Netherlands, Germany, Poland and Switzerland. The addition of Virgin Media’s 3.8 million subs takes it to 21.5 million, ahead of Sky (18.6), but still just behind Comcast, the largest U.S. MSO (22), and well behind world pay-TV leader DirecTV (29 million, including both its US and Latin American subscribers).
The move has been depicted as renewing rivalry between Liberty Global chairman John Malone and Rupert Murdoch, although the latter’s News Corp is only a minority 39-percent shareholder in BSkyB, the UK’s leading pay TV operator with just over 10 million TV subscribers. Malone and Murdoch clashed famously when both attempted to take full control of DirecTV a decade ago, leading to a standoff with both backing down.
Liberty Global does intend to expand Virgin Media and give BSkyB a closer run for its money. Virgin Media has done a good job shoring up its business and becoming more profitable, but currently subs growth has almost stalled at around 3.8 million, with its cable network only covering about half the UK’s households.
The operator’s plans to increase its coverage by deploying fiber for delivery over IP have been thrown into some disarray by the decision of its partner Fujitsu to withdraw from bidding for some projects under the UK government £530 million ($820 million) Rural Broadband Scheme. Telco BT, the country’s leading broadband provider but currently a poor number three for pay TV with 770,000 subscribers for its hybrid IPTV/DTT service, looks like cleaning up from this scheme, and having also acquired around 25 percent of the rights to English Premier League football for the seasons 2013-15, many analysts had though it was better placed to provide strong competition to BSkyB in the years ahead.
But, that was before the Liberty Global takeover, which begs a number of questions, one being whether it will continue with Virgin Media’s zero content strategy, of being purely a distributor.