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| Tuesday, 03 July 2007 | |
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Private equity investors (PEIs) have an undeserved reputation for aggressive cost cutting and über-capitalism. Now the PEIs are set to take control of Virgin Media, that undeserved reputation is to become deserved, after all. In come the claymores, out go the jobs and the quaint concept of customer service…
News that PEIs are circling Virgin Media comes as no surprise. Up to US$10bn may be needed to de-list the company (currently living in the tech-fantasy land known as ‘NASDAQ’) but the usual private equity suspects are lining up to relieve the market of that burden. Virgin Media is the bastard child of successive mergers between UK cable and content (!) companies NTL and Telewest and UK MVNO Virgin Mobile. Worth noting here that the NTL/Telewest gestated for a decade or so. In the overlapping and at times competitive markets for digital TV, broadband, and fixed plus mobile telephony, Virgin Media is arguably the only entity capable of delivering ‘quadruple play’ packages in the UK market from the same ‘hutch’. That’s a likeable fiction, of course, as few customers take all those services from a single supplier. Likewise, VM’s other strength has appeared to be that Virgin Media acquired kudos from the brand attached to the bearded and bewildered business icon, Sir Richard Branson. Anything he touches turns to gold, it is said. Any sale of VM to private equity should not be taken as a case of the famously dyslexic Branson mis-reading the market runes. The gentle knight has ‘previous’ when it comes to taking businesses into and out of public ownership. As reported here, Virgin has already introduced charging on formerly free customer service lines as it seeks to commercialise key aspects of its business on lowest common denominator principles. Customers (including me!) greeted the news with some anger. The fuzzy logic behind taking VM private is that all the synergies due to be executed in the thrice-merged companies can be accelerated in the largely unaccountable world of private equity management. Yes, that’s right… the foot-soldiers of the digital revolution are to be shot at dawn. Nice one, Sir Dick. Pass the buck – all ten billion of them. Jim Chalmers |
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