Virgin Media, which is engaged in an acrimonious battle with BSkyB over the pricing of Sky’s basic channels, has announced it plans to launch a Virgin Media-branded digital terrestrial set-top box bundled with an on-demand internet protocol television (IPTV) service for those households living beyond its cable network. Virgin Media said it was close to securing a wholesale local loop unbundling provider “which will enable us to launch new quad-play product propositions outside of our cable network with only modest capital investment”.
The IPTV service – which will directly challenge BT Vision, which launched in December; Tiscali TV, launching outside of London from next month; and Orange TV, due to launch later this year – will deliver both pay broadcast channels and video-on-demand (VOD). Virgin Media said the ‘off-net’ strategy would help reduce churn when customers moved out of its cable network areas.
Virgin Media revealed its hybrid DTT/IPTV strategy as it unveiled fourth quarter results to December 31, the last full quarter that the company traded as ntl:Telewest before absorbing Virgin Mobile, and rebranding the merged entity as Virgin Media on February 8. The company generated revenues of £1.08bn, up from a comparable £916m a year ago, and operating profits of £9.2m against a £19.4m loss last time. Consumer revenues in Q4 rose from £642.8m to £644.4m.
The company said that it had yet to agree a deal with Sky to carry its basic channels. Virgin Media had offered Sky a binding arbitration process, and was awaiting its response. The current Sky basic channels contract expires at midnight tonight.
“If Sky withdraws its basic channels, we will no longer have to pay BSkyB significant wholesale charges for its channels,” said Virgin Media. “We will divert some of these savings into further content additions to our existing on-demand library. Although we expect that there may be a short-term impact on customer churn and customer acquisition, we believe our differentiated VOD content, and the excellent value and flexibility of our product bundles will continue to attract and retain customers.”
Cable TV subscribers rose to 3.35m from 3.31m a year ago. Virgin Media had 348,000 analogue subscribers at the end of Q4, down from 594,400 last time.
Virgin media said its VOD services were now available to all of its digital subscribers. Its digital TV recorder service, V+, was also now available to subscribers, offering high-definition playback of recording programming. The company said it now had 79,000 V+ subscribers.
Virgin Media CEO Steve Burch said: “Our rebrand and the ongoing improvements to our business that it reflects, signal a great opportunity for our customers and investors and poses a serious challenge to our competitors.”
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