CLASH OF THE TITANS
Virgin Media chief takes on his old boss in broadband battle
GLOBAL media is among the most tribal of enterprises. So it is fairly unusual to see a senior executive move from one group to another – especially when one empire is controlled by Rupert Murdoch and the other by America’s cable king, John Malone of Liberty.
But this is the journey taken by News Corporation troubleshooter, Tom Mockridge, who jumped ship last year to take charge of Liberty Global’s most expensive acquisition, the $23bn purchase of Britain’s cable champion Virgin Media.
Mockridge, 59, a well-travelled New Zealander, has worked for Murdoch around the world from Australia to Hong Kong and from Italy to Britain. And he makes light of the rivalry between the media titans. ‘Listen, they’re both strongwilled business people and competitors, entrepreneurs and innovators. That means sometimes they run up against each other. But they’re very good mates,’ he claims.
It didn’t feel much like that in 2007 when 71-year- old deal addict Malone – once described by f ormer US Vice-President Al Gore as ‘Darth Vader’ – put his tanks on octogenarian Murdoch’s lawn, building an 18pc stake in News Corp, threatening the family control of a global enterprise built over a lifetime.
It took two- and- a- half years for the two men to sign a peace accord that saw Malone better his fellow mogul, winning control of Murdoch’s stake in the US giant DirecTV, America’s largest satellite television business.
‘Malone very intelligently made a smart investment and in the end Rupert had to buy him out to secure the future of his company,’ Mockridge says. ‘Rupert respected that. I never heard him say a negative word about that. These guys are builders, that’s the great thing about working with them.’
In the trendy West London headquarters of Virgin Media, where executives gather in clumps, iPads at the ready, at meetings held standing up, Mockridge looks the part of the modern media executive. The suits and ties have given way to the open-necked denim shirt, and the designer stubble beard fits in with the surroundings.
‘We’re blessed with having John Malone as our chairman. His business has a market capitalisation that is roughly twice that of my former boss Rupert Murdoch,’ he says.
Following the purchase of Virgin and Ziggo in the Netherlands, the Malone enterprises now have operations in 12 European countries with some 27 million subscribers. Liberty Global’s bold ambitions in Europe may partly explain why BSkyB is seeking to lift its game by expanding its trans-European footprint by buying in the minority holdings in Sky Deutschland and Mockridge’s former employer Sky Italia, where he worked before moving to London to run News International – after the departure of Rebekah Brooks.
Malone’s grand European plan is being executed by Denver-based chief executive Mike Fries, who wants to unify the media group’s European operations.
‘One of the first things we integrated was equipment,’ explains Mockridge. ‘We are literally buying millions of broadband routers each.’ Being part of a wider European outfit also enables Liberty to ‘benchmark performance because we are now fundamentally doing the same thing’.
Virgin is key to the expansion across Europe because the UK ‘had the bigger scale, the higher average revenue per user (ARPU) and we are further down the quadplay (TV, broadband, fixed line and wireless telecoms) trail.’
Among other things, the UK cable group is a pioneer in cyber security. ‘The UK team was monitoring the systems for breaches in the UK, now that same group of 50 people are doing it for the entire European network,’ Mockridge says.
Will he take Sir Richard Branson’s emblematic Virgin brand and let it spread some stardust across Europe?
‘It doesn’t do enough to change from existing brands,’ he says. ‘In Germany we have Unity and KBW reflecting the history of those systems. Having some sort of central brand trying to tell someone in Romania and someone in Birmingham and someone in Cork, to get the same message, we don’t think that works.’
The tendency is to think of the core offering of the media giants as the programmes that are broadcast. But Mockridge believes the real battleground is broadband. ‘With broadband comes home television, comes home telephony and increasingly mobile too.’
In the UK, Mockridge says, the only real competition is BT.
‘If you buy from Sky you are a BT customer, if you buy from PlusNet, it is a subsidiary of BT. There are only two networks in the UK, our network and BT.
‘One of our striking statistics is that the capacity usage on our network is rising by 50pc a year. Over the next decade it is 5,800pc or something. It’s just phenomenal. I have been in the business for 20 years and heard people talk about the super-information highway and all this funky stuff and now it is here.’
AT Sky much of the talk is about content. But at Mockridge’s Virgin it i s about delivery to homes and devices. The company has just spent £150m upgrading speeds. One of its key areas of expansion now is to fill in the gaps in a cable network that reaches only 50pc of British homes. Much of the f ocus at present is in London.
‘Our door-knockers (salesmen) find that one home doesn’t have cable and the next two do, so we can infill. So we will have growth in our ability to reach homes and business premises. Under the old structure the extension of the network was taboo because the company was capital constrained.’
In the not so distant past Virgin and Sky wrestled over the price and supply of channels and other content. But Mockridge is far more concerned with capacity and happy to let the Murdoch company get on with the creativity.
‘We have all the Sky channels, having just done a six-year deal with them. It gives us certainty and it gives them certainty to go out and buy programmes.
‘It’s all the sports channels, all the cinema channels, the services which put the channels on tablets and HD.’
One point of difference for Virgin is that if offers the video download library of Netflix. ‘We are the only operator in the world that has Netflix in our set-top box,’ Mockridge boasts. ‘We buy-in content,’ he adds.
Virgin’s parent Liberty recently joined Discovery in buying All3Media which is very strong not just in the UK, but also in Germany, Australia and New Zealand. So Mockridge doesn’t rule out production deals.
When Malone bought Virgin, the ambitions for joining up the dots in Europe were left unclear. Mockridge makes no secret of where Liberty, with its deep pockets, is heading. ‘How do we get the horizontal consolidation that our American colleagues have by default, because they are a single country with 300 million people?’
It is a rhetorical question but clearly Mockridge thinks Liberty has the answer in ‘Big Kahuna’ quad-play, broadband packages.
Once again Malone is on Murdoch’s turf and this time it is geared up for a long, hard battle.