NTL steps into Virgin territory

By ALEX BRUMMER, CITY EDITOR
Updated:

 

YOU have to hand it to Sir Richard Branson. The innermost workings of his business empire are still as shrouded in mystery as they ever were, with assets and activities shuffled around like balls in the Lotto draw, making it extraordinarily difficult to track performance.

But when it comes to creating and branding new enterprises, there have been few better exponents of the art of Anglo-Saxon capitalism. At least four times in the last 14 years Branson has sold on companies he has created to larger or richer concerns.

In 1992 Virgin Records was sold to EMI, in 1997 Virgin Radio went to Chris Evans, in 1999 he disposed of a 49% stake in Virgin Atlantic to Singapore Airlines and now he has sold on Virgin Mobile to NTL in a £962m deal.

There have been whopping mistakes along the line. Branson's claim that he has brought branding magic to former British Rail enterprises is not universally believed. Taking on the giants of the cola industry also proved a step too far.

The big question for NTL's American bosses is whether the Virgin brand can work for them as it has in the skies, on record labels and mobile phones. The hype surrounding the present deal is all about the so-called 'quadplay' offer, the idea that the consumer will want the convenience of cable TV, internet access, fixed-line phones and mobile from the same supplier.

Since convergence is all that anyone talks about in media these days, it looks as if NTL is on the right track. Certainly, with 5.1m customers - before adding Virgin's 4.3m users - there is a strong base. The weakness of cable in Britain is that it has a reputation for poor customer service, unreliability and is a pipe through which content is delivered rather than a creator of anything.

So most of the added value has to be bought in from Sky, ITV and movie moguls. Moreover, it faces ever tougher competition from new players ranging from Freeview to BT, all of which offer bundled services at either low prices or for nothing.

The process of integrating Virgin with NTL has not even started. Steve Burch and Jim Mooney, the NTL bosses, have a huge task and are unlikely to have Tom Alexander, the brains behind Virgin Mobile, to help them. Investors should consider taking the cash.

Euro schism

INVESTMENT bankers will not know whether to laugh or cry when they see the extent of the European Commission's intervention in the Continental energy market.

Over the short haul it looks as if it will be much more difficult to push to fruition some of the biggest deals, most notably the state-sponsored merger of Suez with Gaz de France in the name of economic patriotism.

If the EC is successful in pressing its case for an opening of all Europe's borders to mergers and acquisitions, there could be a bonanza on the way in the coming years and decades.

Unfortunately, investment bankers tend to think in terms of the next quarter's earnings, league tables and bonus payments rather than the long term. So they will be horrified if the EC's court actions bring a halt to the current wave of internal mergers.

This paper often has its quarrels with Brussels but on this occasion the bureaucrats appear determined to enforce the single market. The irony of the present situation is that the country which is most overtly Eurosceptic - Britain - is the one which has been most open to cross-border deals in all sectors from energy to plasterboards, banking and even our airports, with BAA under siege from Spain's Ferrovial.

In contrast the old Europe, which claims a monopoly on the virtues of Euroland, has become the greatest protector of national interest. It is interesting to note that the EU has not confined itself to the energy sector but also has decided to tackle France in the courts over its decision to put a red line around 11 vital sectors of its economy from casinos to yoghurt.

In the end all of this will be a tug of war between Brussels and the strongest Euroland nations - France, Germany and Italy.

Countries which not so long ago were plunging headlong into a new constitution are now set on a collision course with the very commission they sought to strengthen.

Heavy lifting

SAY what you like about former BA chief executive Bob Ayling, he has guts.

Not satisfied with his past stewardship of the Dome and his present role as camper-in-chief at Holidaybreak, he has decided to take on the unenviable task of sorting out the music group Sanctuary. Goodbye chinos and polo shirts, and hello leathers and heavy metal.

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