The boss of the UK cable operator wants BT and EE stripped of spectrum as a condition of their merger but thinks Openreach should remain a part of the BT Group.

Iain Morris, International Editor

October 20, 2015

4 Min Read
Virgin Media Boss Attacks BT/EE Deal

LONDON -- Broadband World Forum -- Virgin Media CEO Tom Mockridge has joined calls for BT and EE to be stripped of spectrum licenses following their £12.5 billion ($19.3 billion) merger but urged regulatory authorities not to mandate the structural separation of BT's Openreach infrastructure business.

Speaking at the Broadband World Forum in London earlier Tuesday, the boss of the UK cable operator said that BT Global Services and EE would control about two thirds of the best spectrum in the UK market following their tie-up.

"It would leave too much spectrum in the hands of one company and would not be a good outcome," he told attendees during a keynote presentation.

BT and EE are hoping to wrap up a merger early next year but have come under attack from rivals while they wait for regulatory authorities to approve their plans. (See BT Locks Down £12.5B EE Takeover Deal.)

Currently a joint venture between Germany's Deutsche Telekom AG (NYSE: DT) and France's Orange (NYSE: FTE), EE has been able to roll out higher-speed mobile broadband services than its rivals by taking advantage of its generous spectrum holdings, and a merger with BT -- which picked up 2.6GHz licenses during the UK's 4G auction -- would leave it in an even stronger position.

A part of John Malone's Liberty Global Inc. (Nasdaq: LBTY), which owns cable networks across Europe, Virgin Media Inc. (Nasdaq: VMED) provides mobile offerings through a wholesale arrangement with EE, and so measures to reduce EE's spectrum holdings could actually have an impact on the cable operator's own services.

In other European markets, Liberty Global has looked eager to wean itself off such MVNO arrangements and become a fully fledged mobile network operator. (See Telenet Buys KPN's BASE in $1.4B Deal.)

The company was recently involved in talks with Vodafone Group plc (NYSE: VOD) about an exchange of assets that could have allowed it to address its mobile network shortcoming in a number of countries, but the discussions ultimately proved fruitless. (See Vodafone, Liberty Call Off Asset-Swap Talks.)

For more fixed broadband market coverage and insights, check out our dedicated broadband content channel here on Light Reading.

While Mockridge has sided with Vodafone and other BT rivals on the spectrum issue, he opposes their view that BT should be carved up into separate retail and network companies to improve competition. (See BT Split Could Spur Vodafone to Invest in Fiber – Colao.)

"This is not something we agree with as an infrastructure investor," he said. "BT was privatized 30 years ago with that network and a choice was made then -- it is not reasonable to come back to this a second time."

Although Virgin Media's network is not subject to the same regulation as BT's, Mockridge is undoubtedly concerned that a carve-up of BT could lead to greater scrutiny of his own business, which would be the UK's biggest infrastructure player offering retail services if Openreach were spun off.

Currently available to about 13 million UK premises, Virgin Media's cable network is being extended to another 4 million as part of a £3 billion ($4.6 billion) investment program announced earlier this year. (See Virgin Media Plots £3B Invasion of BT Turf.)

Introduced last month, Virgin Media's highest-speed broadband service of 200 Mbit/s compares very favorably with BT's premium offer of 76 Mbit/s and Mockridge revealed at the Broadband World Forum that his company will launch a 300Mbit/s service for small business customers early next year.

But he complained about other aspects of the current regulatory set-up, pointing out that fixed-line infrastructure rivals to BT lack the same ease of access to premises as infrastructure suppliers in the energy sector.

"We have to go to landlords and buy wayleave entitlement to put broadband into apartments and houses," he said. "It needs to be more pragmatic for newcomers to gain entry to premises -- something that BT enjoys because it owns the copper networks put in by the taxpayer a century ago."

Virgin Media currently claims to serve 5.5 million cable customers and 3 million mobile subscribers, including 4.9 million broadband users, 4.1 million TV users and 1 million quad-play users subscribing to packages of fixed voice, broadband, TV and mobile services.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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