Troubled Virgin Media turns the corner at last

VIRGIN Media is a company with a troubled past. Having posted a full-year loss of £94.4m, it obviously still bears the scars. After 25 years of pain, however, the firm is finally turning a corner.

The most impressive detail in yesterday’s results was the 28,600 net subscribers the firm signed up to its cable TV service in the final quarter, the biggest number since the firm was formed from the merger of NTL and Telewest.

It is broadband – not television – where Virgin is really setting the pace, however. Yesterday it announced the launch of a 100 megabits per second (Mbs) service, putting its rivals in the shade.
BT has said it too will build a so-called “next generation network” but Virgin’s cable network means it can roll one out much faster. It is also testing a 200Mbs second service.

Cynics say there is no demand for a 200Mbs service, which could download an hour-long television show in 15 seconds and a high-definition movie in three minutes. The number of customers who want such speeds, they say, just wouldn’t justify the investment.

But if you build it, they will come. As TV and film viewing shifts from the television set to the computer, the kinds of speed that super-fast broadband offers will be worth paying for. After all, 15 seconds for a TV show and three minutes for a HD film sounds fast, but it’s still longer than the amount of time it takes to switch channels with a remote control.

Broadband is also extremely profitable for Virgin. Unlike Sky, which pretty much gives its broadband away as a loss leader to sign subscribers to its high-margin television service, Virgin’s premium service actually pays.

That’s why Virgin’s customers pay more than any other. The average user pays the firm £538 a year, compared to Sky customers, who pay an average of £464 a year. That number can only rise as long as the firm has the high-speed broadband market to itself.

When Vodafone boss Vittorio Colao called on policymakers to investigate Google’s dominance in mobile advertising last week, he probably didn’t expect such a quick reaction.

But Google is now facing a preliminary anti-monopoly probe by the European Commission. Such a development was largely inevitable – advertisers have long-said the search engine has too much control. It’s too early to predict the outcome – these things can take decades (ask Microsoft). But with management having to put regulation before strategy, the web giant’s shareholders should be concerned.