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Malone eyes Virgin in Murdoch challenge

Tuesday, February 05 10:35:29

John Malone's Liberty Global has opened talks with Britain's Virgin Media over a takeover that would increase the U.S. cable group's dominance in Europe and step up a challenge to media mogul Rupert Murdoch.

Virgin Media, the No. 2 pay-TV group in Britain behind Murdoch's satellite group BSkyB, has a valuation including debt of around $20 billion.

A deal would give Liberty entry to one of Europe's biggest telecom markets and allow it to apply lessons learned as a pay-TV and broadband provider in 11 other European countries.

Malone's Liberty could offer one of the sternest challenges to Murdoch as cable groups across the region start to assert their authority over traditional telecoms firms with the offer of super-fast broadband and pay-television.

Malone, whose group has 19.6 million customers, came up against Murdoch a decade ago when Murdoch's News Corp. and Liberty Media vied for control of DirecTV Group, the largest U.S. satellite TV broadcaster.

The stand-off ended when both sides backed off. News Corp. sold its one-third stake in DirecTV to Malone's group and Malone sold 16 percent of News Corp. that Liberty had acquired, giving the Murdochs fuller control over News Corp.

Buying Britain's second-biggest pay-TV company would put Malone up against Murdoch's satellite group BSkyB, which leads the British pay-TV market with 10.7 million customers compared with Virgin's 4.9 million.

It could also leave the combined group weighed down with heavier debts.

Virgin Media's bonds widened and the cost of insuring its debt rose on expectations that more debt would have to be raised to finance a deal. It is also rated higher than Liberty Global, which could impact its credit profile.

Virgin Media's main listing is in the United States but it has a smaller one in London, where the shares were up 14 percent in early trading.

News Corp owns 39 percent of BSkyB. Murdoch tried to buy the rest in 2010 but had to drop the $12 billion bid due to public outrage over a phone hacking scandal. Shares in BSkyB were down 1 percent against a FTSE 100 Index which was up 0.3 percent.

Virgin Media, which confirmed the talks with Liberty in a brief statement, has a market value of $10.6 billion and $9 billion of debt. (C ) Reuters