Virgin Media Poised to Monetize Infrastructure Investment - Barron's

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Virgin Media by Kopin Tan

Summary: Britain's largest cable company Virgin Media (VMED), an NTL/Telewest, and later Virgin Mobile merger, offers "quad play" TV, telephone, broadband and wireless services to its 4.8 million customers—3.2 million of which are broadband. Investors who love U.S. cable companies because their infrastructure investment enables cutting edge tech bundled telephone, television and internet services, are now scooping up VMED's 20% discounted shares. Though expensive to build, VMED can now capitalize on infrastructure for next generation services. Virgin's Q1 numbers showed land line customers disappearing and nearly 47,000 customers unsubscribed, while its pricing spat with British Sky (BSY) [BSY subsequently removed popular shows] illustrated the stiff competition cable faces from satellite TV. But irate BSY fans calmed, and Virgin's growing broadband business helped offset losses. Brand defectors were down to 1.6% and "triple play" sales were up 35% from Q1'06, increasing revenue per customer to £637/year. Cash flow and brand recognition make it a buyout target: A recent offer for Cablevision (CVC) valued it at $10.6 billion or $5,000/subscriber.Virgin's shares trade at 6.4 P/E to U.S. companies' 8-9 P/E. Bulls say 'now's the time to buy.'

VMED 1-yr. chart:

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