Strength through unity
By Kate Bulkley
01 April 2006
It's taken years, a lot of debt, a couple of bankruptcies (sorry, Chapter 11 restructurings), a revolving door of executives and a lot of revised business plans, but the UK cable business is now under one umbrella and, soon, perhaps, one brand. A CEO with 17 years experience at Comcast, the biggest US cable operator, has been parachuted in and the newly invigorated company is "on the verge of doing some exceptional things", promises Chairman Jim Mooney.
All good news, but just as cable seems to be on course to provide a viable alternative to BSkyB, the competitive landscape is getting a lot more crowded. Other companies, from BT to Vodafone to Wanadoo, are all moving in on the triple-play (and increasingly the quad-play), while online giants such as Yahoo! and Google are trying to get into the video distribution and voice-over-IP game.
NTL's new CEO, Stephen Burch, is an old cable hand who has been through integration processes before. At Comcast Atlantic he was charged with integrating two million AT&T cable subscribers in his region when Comcast purchased AT&T Broadband in 2002, a task he completed in 18 months. At his first call to NTL investors in February, Burch said he had already identified the un-sexy but crucial task of getting one billing platform across all franchises as a key priority and promised to achieve this in 13 to 15 months, not the three years envisaged by the previous management. A single billing system will offer better credit control and also allow better up-selling and cross-selling, crucial to generating more revenue per customer and decreasing churn. With no NTL/Telewest institutional baggage, Burch also has no qualms about recognising that Telewest was actually the better of the two cable operators, with a superior approach to selling triple-play services and better customer services. He said he had been selling triple-play at Comcast ("just not as expensively") and that the focus going forward is on "the triple-play sale at the point of sale".
But one big difference with the US market is Freeview. The robust health of the DTT service complicates the pay-TV sale both for cable and Sky. BT's forthcoming hybrid on-demand TV and Freeview offer can only further complicate the field. The demographic of Freeview homes is getting younger, moving into traditional cable and satellite territory. NTL is now targeting new customers with a new entry-level offer that might appeal to those attracted by digital terrestrial.
BSkyB is also fighting back by moving into broadband services - it is buying broadband provider Easynet in October. And even as the new cable giant is tying up its deal to buy Virgin Mobile, Sky has moved into mobile services with Vodafone late last year.
NTL's pending £900m (€740m) deal to buy Virgin Mobile would take the company into the land of the "quadruple-play" of TV, fixed phone, broadband and mobile telephony, adding Virgin's five million phone customers to NTL's three million broadband subs, just under three million digital TV subscribers and just over four million fixed telephony subscribers. Jettisoning the NTL and Telewest brands, tarnished by poor customer service and broken promises, would be a good move. Virgin as a brand has all the attributes that cable needs to help re-make its image: cool, customer-friendly, entrepreneurial. It also has incredible resilience. If Virgin Trains can't kill the Virgin brand, there's hope that cable will gain more from Virgin than it can take away.
But the re-branded company could do well to take another leaf out of the Telewest handbook which had already re-cast the triple play of TV, telephone and internet into TV-on-demand, PVR and HDTV. Both NTL and Telewest launched VOD at about the same time last year, but Telewest has been much more aggressive about HD and PVRs and these services will either differentiate its offer or make it comparable to its competitors. BSkyB is aggressively pushing its Sky Plus PVR service and will launch a package of HD channels before the World Cup in June.
And then there is content. NTL has hired Malcolm Wall (ex-United Business Media and Five) to sort out its content assets, which span Flextech's niche TV channels, a joint venture with the BBC and Sit-up's call-TV channels. Mooney told investors he sees content as "a weapon" against its competitors but he reiterated his view that partnerships were the best way to leverage it. He didn't rule out a bid for rights to FA Premier League football in the wake of the European Commission's decision that rights are to be split between at least two rival broadcasters from 2007-08.
Oh, and the new cable company has also registered a new debt package that could be worth US$2.7bn (€2.2bn). The proceeds will "give the company room" to buy back stock or pay a dividend and "re-allocate capital going forward", said chief finance officer Jacques Kerrest. Some things never change.