Try the new FT.com

November 10, 2006 10:03 pm

Battle of the living-room commences

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

The latest battle for control of Britain’s living-rooms began on a private island in the Caribbean last weekend when Sir Richard Branson took Steve Burch and Neil Berkett, two of NTL’s most senior executives, aside.

Their meeting on the island of Necker, appropriately located in the British Virgin Islands, came during the annual forum for Virgin Group managing directors.

It set the seal on a month’s detailed work by Malcolm Wall, head of the NTL content business, on an audacious bid for ITV backed by Sir Richard, NTL’s largest shareholder.

By Wednesday, Jim Mooney, NTL’s chairman was phoning Sir Peter Burt, his opposite number at ITV. His proposal that the two companies discuss “a combination transaction” took investors by surprise but could have far-reaching consequences.

Sir Richard’s island gatherings, with lectures by climate change experts and Web 2.0 gurus, have echoes of Rupert Murdoch’s executive retreats.

But the deal the men discussed on Necker is aimed squarely at beating Mr Murdoch in the battle for how British households will consume entertainment and communications services for the next decade.

NTL’s vision is that by combining pay television with free-to-air broadcasting, while acquiring one of Europe’s biggest production companies and television archives, it will be able to differentiate its cable, broadband and mobile services from the offerings of other companies.

Chief among those rivals is British Sky Broadcasting. The satellite company, chaired by Mr Murdoch and led by his son, James, has been NTL’s arch-rival for years, consistently beating the UK’s recently-merged cable companies in pay-television subscriber numbers.

This summer, Sky became a more direct threat by launching a broadband access service, mimicking NTL’s combination of pay-TV and internet access. NTL’s acquisition of Virgin Mobile, which gave Sir Richard a 10.5 per cent stake in the combined company, created a “quadruple play” of television, internet, landline and mobile telephone services which Sky has said it does not intend to copy.

But the prospect of NTL gaining a terrestrial broadcaster could shake up the competitive landscape still further.

Senior industry executives argue that Sky will not stand idly by if NTL succeeds. One rival executive speculates that Sky could even examine a bid for Channel 5, the terrestrial broadcaster owned by RTL, Europe’s largest commercial broadcaster.

The prospect that NTL could promote its other services on ITV’s mass-audience channels may also force other rivals to reconsider their strategies.

BT Group, which launches its BT Vision internet tele-vision service next month, has debated whether to bid for ITV itself in the past, but senior executives are thought to have little interest in owning content, and BT is not thought to have active plans for any counter-strike.

An NTL-ITV combination could also bolster ITV’s position against the BBC, which has made far greater strides in developing online distribution for its content. Recent entrants to the broadband market such as Carphone Warehouse and O2 may also have to consider whether they, too, will need to acquire exclusive content.

All this, however, does not change the glaring reality that NTL and ITV each still have serious problems.

Copyright The Financial Times Limited 2017. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments
SHARE THIS QUOTE