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Ethernet services

Virgin Business Looks to the Clouds

After years of struggling under the weight of an uninspiring brand and an identity crisis, Virgin Media Business Ltd. is feeling reinvigorated, ready to expand, and up for a battle with its biggest rival, BT Group plc (NYSE: BT; London: BTA). (See Branson Ups Battle With BT and Virgin Media Business Launches.)

The service provider, known until February as ntl:Telewest Business, is the third-largest business services player in the UK, behind BT and Cable & Wireless Communications , with 2009 revenues of £580.8 million (US$886 million). But it has other challengers, too, such as Colt Technology Services Group Ltd and Global Crossing (Nasdaq: GLBC). (See C&W Does the Splits.)

Its key market is the UK government sector -- national and local -- where it has had a fair degree of success delivering voice and data (particularly Ethernet) services during the past few years. In fact, the company is contributing to debates on Carrier Ethernet interconnect and packet-optical developments at next week's Ethernet Europe 2010 event in London. (See Ethernet Europe 2010 Preview, Ethernet Europe Lineup Announced, and ntl:Telewest Unveils Ethernet VPN.)

Now, though, it's shaking off its old identity, and, after years of market talk about a potential sale, the rebranding has sent a message to the market, and internally, that the business services division of the UK cable giant Virgin Media Inc. (Nasdaq: VMED) is "part of the group going forward," says Virgin Media Business (VMB) managing director Mark Heraghty, a former Global Cloud Xchange (FLAG Telecom) executive. (See ntl:telewest Rumor Resurfaces and ntl:Telewest Names New Director.)

"We believe the rebranding can help grow the business. It's a strong brand. And now the Virgin Media CEO [Neil Berkett] talks about us, whereas he didn't before. We are now core to the company plan," says Heraghty.

That would mean reversing a trend. VMB's annual revenues have dipped for the past two years, and fell by more than 7 percent last year compared with 2008.

With that in mind, Heraghty is adopting a "defend and grow" strategy. To help retain his existing customers, he's investing in VMB's transport capabilities and in service-supporting infrastructure, such as power management -- providing good services isn't always about the sexy stuff, he notes. Indeed, even before Heraghty joined, the service provider was very focused on customer experience and support issues. (See ntl:Telewest Touts Portal.)

And he's also seeking partners to help extend VMB's offerings into the cloud services market.

The company doesn't currently offer cloud services capabilities -- "Eventually that could become a problem," Heraghty notes, as CIOs buy into the cloud concept -- and isn't intending to invest a lot of time and money in building its own. Instead it's in discussions with as-yet-unidentified IT giants that, if all works out, should result in framework agreements that will allow VMB to offer a full range of on-demand applications, says Heraghty.

"We need to remain relevant," says the Virgin man.

Also on his "to-do" list is a defensive strategy in the UK government communications services sector, where VMB essentially has business to lose. He notes that local governments especially are consolidating their network and services capabilities and seeking a single shared supplier. That's good news for VMB if it can hang on to that business, as it has done already in the southern England county of Hampshire, but would be bad news if large deals went elsewhere.

Where Heraghty sees potential growth is in the wholesale sector (with mobile backhaul a particular target), and in some of the key verticals, such as retail and finance, where it hasn't been a challenger up to now but could target the medium-sized corporates with communications budgets ranging from the single millions to low tens of millions of pounds sterling. "We can be the third player. We have the network, and we have the brand, and we've nothing to lose from trying to get into those sectors because we're not the incumbent."

He concludes: "We could be a lot bigger. There's a lot of untapped potential. We're in a great position to defend and grow, but to do that we have to execute on our strategy, and that a non-trivial issue."

— Ray Le Maistre, International Managing Editor, Light Reading

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