back to article Liberty and MXC jump into bed, light up joint venture

Cable giant Liberty Global has inked a deal with MXC Capital, an AIM-listed tech investor, to create a buy-and-build IT services business that sells to UK SMEs. In a stock market announcement, MXC said: “The newly established joint venture company will initially seek to undertake a series of acquisitions in order to create an …

  1. Anonymous Coward
    Anonymous Coward

    The other man's grass.

    Liberty Gloibal and VM think they're a tech business, and they understand the IT services market because they're in it. Unfortunately they aren't in tech. Cable companies are a combination of a customer acquisition and billing function with an infrastructure build and operate business. They lack speed, they lack customer focus, they lack commercial deal skills, and their credentials for providing IT services are poor.

    Whilst Liberty Global may think that this acquisition will give them the skills they need, and that they can just nail the customer billing and infrastructure together with the acquired business to create some remarkable high value proposition, that isn't how it works. I've spent many years with incumbent businesses looking to grow. Very, very few manage this through acquisition, because as soon as they buy a smaller business, they instantly lose the hunger, drive, commercial and creative freedom that enabled the smaller business to grow. There's instantly a need for "oversight" and control from the parent company, the original owner-investors either flee taking their relationships, commercial nous, and business knowledge with them; Or they hang around as bitter prima-donna divisional MDs, angry that they don't have the freedom and control they once did. I know this, having worked for a company that spent a billion dollars and a decade building a US technical services business through acquisitions, before having to admit defeat and sell for half the book value.

    When I look at Virginmedia, I think of a cable utility. I think of a company that's just fluffed its roll out and new customer targets. I think of a company still stiffing customers with defective Puma 6 cable modems. I think of a business hidebound by the Virgin brand. I think of a company that has offshored much of its customer facing activity, that couldn't give a tinker's cuss about the poor standards of offshore service. I think of a company synonymous with repeated double digit price rises to please US capital markets. This isn't a good basis from which to expand in a field about which they know nothing.

    1. Anonymous Coward
      Anonymous Coward

      Re: The other man's grass.

      I think of a company that has offshored much of its customer facing activity,

      You missed offshoring and contracting out-of-house core technical expertise. If memory serves me right has been nearly 15 years since a permanent member of staff has had anything to do with NTL (and nowdays) Virgin DNS. Other core services are all contracted out too.

      I find it quite entertaining when a company like that (and Virgin is not alone in the UK here) opens their mouth on the subject of offering IT services to SMEs. My first thought is: "Wait a minute, you do not do any of that in-house for your own staff and you are trying to offer what?"

      1. Anonymous Coward
        Anonymous Coward

        Re: The other man's grass.

        I find it quite entertaining when a company like that (and Virgin is not alone in the UK here) opens their mouth on the subject of offering IT services to SMEs.

        Worth thinking about why they would do this. Virginmedia have a vast, largely unregulated infrastructure business, and a lightly regulated customer service operation. They can charge what they like, up to the level that customers flee to Openreach's usually much slower offerings. Why take the risk of an unrelated diversification, and one that will continue to consume cash through bolt-on acquisitions, and make losses for years due to the costs associated with integration of the acquired businesses?

        There's only two possible reasons I can see:

        1) Liberty Global believe that Openreach can and will roll out FTTP, or in Virginmedia's current service area between 2020 and 2025, opening up what is currently a monopoly for fast broadband, and because of LLU, there will be many competitors offering much better prices, causing VM to either cut their prices, or lose customers - although the effect will be the same, a reduction in revenue that will factor straight through to come out of VM's currently generous profits.

        2) Maybe Liberty Global don't think there's much chance of the above, but believe that regulation of their cable network will be put on a similar footing to Openreach, requiring them to open their network to wholesale buyers, enabling third party suppliers to offer lower prices and more varied packages. Not only does that mean the loss of some retail customers, the resulting spotlight on VM's wholesale charging will be most unwelcome, because wholesale buyers (mostly the same people offering services over Openreach wires) will quickly complain to Ofcom and government if VM are trying to fleece them. And because VM can't play the GPO pension card, government won't mind too much if VM get hauled in front of an inquisition by (for example) the Competition & Markets Authority.

        Regardless, Liberty Global believe that they can do a tech roll-up of serial acquisitions, and as the guy quoted in the article says, these do not have a good track record. Even outside the tech sector, the same is true. Buying companies, integrating acquisitions, and growing a freshly forged corporate business are three very different skills that you rarely see combined - in my experience, most roll-ups involve all three being done badly. I see this ending up like BT Global Services - an unloved, poorly performing B2B operation that cost the parent a lot of money to create, but now created a load of unexpected problems even as the parent group has lost interest in, and would sell if it could.

  2. EnviableOne Silver badge

    Virgin media are still dtrugling to merge Telewest, NTL and Virgin Mobile and create a consistant model across the organisation. VMB has been trying to capture the SME market for a while but is seeing limited traction, due to the flexibility and price of LLU services and some less than optimal routing of circuits that lead to delays in the region of 100ms, when you can get aus for twice that.

POST COMMENT House rules

Not a member of The Register? Create a new account here.

  • Enter your comment

  • Add an icon

Anonymous cowards cannot choose their icon

Biting the hand that feeds IT © 1998–2022