Tuesday, August 30, 2016

Virgin Media investment plans

Over the weekend Virgin Media revealed it's latest investment plans to The Telegraph. It is seeking to expand it's network asking Liberty Global to increase it's investment to grow the footprint of it's Fibre network a £3bn plan to grow from 50% of households covered to almost 66%.   

Given that interest rates are at all time lows and Virgin have said that the investment has a good return in growing the customers base in areas where they are new entrants rather than established provider why are they not seeking to be aggressive and double the investment? The reports on broadband coverage in Britain say that the costs are not commercial for just the last 10% of households and so the capacity is there to almost double what Virgin already has. 

We could say that Liberty Global is being cautious given the uncertainty around Brexit and its economic impact or as a Global player the upside of investment outside of the UK is greater than inside.  One option would be for Virgin to become more of a player within the Business market which its brand does not speak to other than in the small business sector, some players are realising that BT is providing a very poor quality service.   

Is Virgin gaming the market to such an extent that it knows that investment is infrastructure is like betting on England's football team? It needs to stay in the game and the cost of new customers is lower in areas that it is an entrant to rather than established in that they are likely to buy a bundled service bigger than that established customers.

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