Bad News For Virgin Media Customers

Originally Posted by BBC News

Virgin Media, the UK's leading cable television company, is set to be taken private for more than £5.5bn.

Carlyle, one of the world's leading private equity groups, has made a preliminary offer of between $33 (£16.50) to $35 per share for Virgin.

Shares in Virgin, which is listed on the US Nasdaq rather than in London, closed on Friday at $24.37 per share.

Sir Richard Branson is the largest investor in Virgin Media, which has 9m customers and a £4bn annual turnover.

Dunno if anyone has noticed this, its in the BBC Business News part of their website. I red it before and I have to say I am quite chocked that Virgin Media's shareholders are selling up so soon after the re-brand and re-stabilisation of the company, but it seems they are probably getting out "whilst the goings good" and whilst its worth something incase it goes the same way as it did after CWC sold up in 2000.

I would be seriously worried if I were a Virgin Media customer on hearing this news, im not sure how many people on these forums understand how private equity companies operate, but its pretty much a case of get in with money borrowed from banks, cut costs, increase profits, and get out with 50% more than what they have to pay back to the bank.

It goes to prove my theory about CWC getting the sale of the century in 2000 true lmao, I mean even with these over-inflated share prices, the whole of Virgin Media is only worth £5.5billion, and NTL paid £8.1billion just for CWC Residential Cable services haha!

Something isnt right about this deal though, the figures dont add up at all, this is possibly going to be a bad deal for the customers even compared to other private equity deals...

BBC News Report

that not good news as a virgin customer things just seam to be going from bad to worse think it might be time to leave and go to sky i think

I fail to see how its bad news?
I'm still paying the same and have the same service.

What ever there internal politics is i'm not arsed.
They say that going private has its advantages too.

Originally Posted by bbc

What will it mean for Virgin customers?

It is not clear at the moment what the impact of any deal would be for Virgin customers.

However, any new owner will want to retain existing customers and attract new ones which could see improvements in programming and changes to pricing.

Click Me

Matty its only you that says its "Bad News"
No where in either of the reports is "Bad News" Mentioned.

I'm a happy customer with Virgin and have been for about 10 years

as long as they dont change there prices so it betters them and not us

Mark, you need to understand how private equity companies work before you judge it. Im afraid, as you obviously have no understanding of this, you are blind to what will happen to the company.

This is why I said during the post im not sure how many people on the forum understand how private equity works - you need to, to be able to understand why this is appauling news for a company that seems to be going forward under its current owners.

Also, how exactly can it only be good news? The fact that a single company can't seem to hold on to the same owners/shareholders for longer then a year or two at a time shows me either none of the owners have had interest in the customers, or therer are far deeper rooted problems either financially or structurely then we know about.

You can defend this all you want, but when your customer services goes down the pan and the amount of channels you can watch goes with it as well as substantial cuts in things like IP transit and internet peering, will you still be saying that??

Go and learn how private equity companies work and then tell me you "fail to see how its bad news".

Originally Posted by MattyC

Mark, you need to understand how private equity companies work before you judge it. Im afraid, as you obviously have no understanding of this, you are blind to what will happen to the company.

Matty DONT assume what i do and don't know.

At the moment from the information that has been released its unknown. The BBC have Robert Peston, BBC business editor quoting that "It is not clear at the moment what the impact of any deal would be for Virgin customers."

And that's where i sit too, its not clear what the future is just yet. When i know more, and if i feel the service has got worse then i will move to a provider that can provide what i need.

Simple really.

A prime example of this is what is happening to the AA under the ownership of Permira (a private equity company). I cba explaining, but found a good link here.

Originally Posted by BBC

Since the private equity firm Permira helped take over the AA in 2004, about one third of its workforce of 10,000 have lost their jobs.

Former award-winning AA patrolman Steve Thompson is among several current and former AA staff who tell the Money Programme that private equity has, in their view, damaged the company they love.

"If anybody hears that private equity is taking over their company, beware of the signs," he says.

Some of the AA's staff were represented by the GMB trade union. Its officer Paul Maloney is critical of the management's approach during the job cuts. He describes it as "horrendous" and says it amounted to "corporate bullying".

The reasons that private equity companies make such a great profit when selling on a company is due to the ruthless business model that is involved. They buy a business for an above market price using borrowed money, securing the debt on the company, then they do two things:

- Cut costs in every possible way (ie. cutting levels of customers support is the first thing, job cuts all round, lowering the overall QoS etc...)

- Get as many customers as they can possibly get ahold of, even if it means making a substantial loss on each and every customer gained. This leads to unsustainable services and lowers the quality for each and every customer, no matter how much they pay.

Then when the numbers look artificially good, they sell up for a price that pays their debt to the bank and makes them a substantial profit at the same time.

A private equity group has NO interest in the customers, staff or QoS of any company it acquires. Its sole purpose is to make a substantial profit when they come to sell the company on. Private equity groups are ruthless with cutting costs to increase profits, they dont really give a shit if it impacts upon customers services.

Private equity also isnt without pitfalls, and it removes any gurarantee of service, as it is 100% dependent upon the current financial market as the key to its success (which is the reason the majority of any debt accumalated in the purchase of the company is secured on the business, not the PE group).

Originally Posted by BBC

But then there's the small issue of debt. The private equity owners loaded the AA with £1.3bn of borrowed money during the takeover. This has since risen considerably.

Understanding how this works is the key to understanding the private equity buyout system.

Some £1.3bn of the AA's initial buyout of just less than £1.8bn came as loans arranged by Barclays Bank.

Former venture capitalist Peter Folkman argues the prudence behind this level of debt is dependent on the general health of the economy.

"If the company is making more profits, it can service the debt. That's fine," he reasons.

"If we get hard times then, undoubtedly, it'll make the AA much more vulnerable."

Originally Posted by BBC

As private equity investors become bigger players in the UK economy - the £11bn buyout of Boots is set to be the largest ever in the UK - there is concern at very high levels at the size of the debt being piled on the companies that get taken over.

The Financial Services Authority has raised concerns that one day a private equity company might collapse under the weight of its own debt.

Now personally, I like to be with companies that are in it for the long run, have investors and owners who give a damn about their customers, and are financially secure in all market climates and not liable to callapse because of a small change.

If you would rather be with a company that doesnt give a shit about you as a customer or the staff that work to provide your services, and is only providing your service as part of a short term investment and profit making scheme then thats fair enough.

I have taken a keen interest in how PE works in the last few months, after constantly seeing bad press regarding them on various business and investment programmes and websites.