Can there be too much convergence at once? Evidently not, if Sir Richard Branson is to be believed. Barely has the ink dried on the contract irrevocably linking the fortunes of the Virgin brand to NTL:Telewest’s flaky corporate construct than he is haring after another prize: ITV. As by far the biggest shareholder in NTL (hereto after Virgin Media), which is formally tabling the bid, his assent will have been essential.
On the plus side, the proposal has an element of macho daring to recommend it. ITV’s days of stock market independence have looked numbered for some time. Charles Allen’s precipitate departure and the ensuing debacle over finding a successor, for which chairman Sir Peter Burt must take much of the blame, have only made the day of reckoning more imminent. So now, while ITV is on its knees and before the private equity boys have got their act together, is definitely the time to snap up one of Britain’s most valuable content providers at a bargain-basement price.
But is Virgin Media the right vehicle to do it? Critics have tended to latch onto the technical obstacles to such a union, and not without reason. NTL will need to nearly double its debt to over $10bn if it is to succeed (ITV is capitalised at about £4.4bn), which is no mean financial burden. Then again, there will be the stress of integrating a huge acquisition through the still-sore digestive tract of the NTL/Telewest/ Virgin beast. And that’s not to mention any water-torture that can be inflicted by the regulators. So it’s not for the faint-hearted.
But no one could ever accuse Branson of being that. Indeed, it is precisely his entrepreneurial vision, flair and drive that have enabled him to succeed over the years where other, more corporate, approaches have floundered. The danger may, in fact, lie elsewhere.
The bid is macho in more ways than one. In place of "four-play" we are now being asked to contemplate a chest-beating "six-pack" offer of programme production and Friend Reunited Web content added to the existing "four-play" of mobile, TV, telephony and broadband.
The trouble is, it’s much too early to tell whether "four-play" (let alone "six-pack") actually has much appeal to consumers. Time is what the new Virgin Media needs to test the original merger concept and time is precisely what it will not get if the company becomes involved in a fresh, distracting takeover bid. Virgin’s biggest asset, other than the value of its brand, is the strength and experience of its top management team, headed by James Kydd and Ashley Stockwell – who are veterans of many Virgin ventures. So let’s hear the wise words of one of them, Stockwell, on the foolishness of moving too fast: "I was involved in the rebranding of Virgin Trains," he says. "We rebranded too quickly… What we are deliberately doing here is not rebranding from the completion of the deal, which we could have done. We absolutely cannot over-promise and under-deliver." Amen. Of course, there are certain things the Virgin team will be able to remedy quite quickly, such as NTL’s truly appalling customer service record. But translating improved service into diminished churn and still more, improved customer acquisition, will take a lot longer.
Luckily for Kydd and Stockwell, the ITV bid will probably fail to come off.