Regulatory approval for the £15 billion acquistion of Virgin Media by US cable giant Liberty Global is expected imminently, but the company's business division is already planning its strategy for the next year, with a new managing director at the helm.
Announcing his appointment as MD of Virgin Media’s business division to Computerworld UK, Tony Grace said the company is focusing on three platforms for growth – infrastructure, public sector and the enterprise market.
“It will be a challenge and one we are looking forward to,” he said.
New focus on products
Grace’s entrance to the new role, taking over from the departing MD Mark Heraghty, comes on the back of strong growth within a business division that has developed strongly since the rebranding of NTL-Telewest.
Virgin Media Business now accounts for 15 percent of the total group revenues, representing 30 percent of revenue growth, and saw 5.2 percent yearly growth in revenues for 2012, according to its most recent financial results.
“We had a very good year in 2012, relative to the market,” Grace said. “Q4 was not as good as previous quarters but we saw that coming, due to the spikiness of some of the large contracts that can influence quarter-on-quarter. But the level of growth in a flat market was a fantastic achievement.”
In the enterprise space, Grace admitted that the company has typically “underperformed” in the past, despite owning a network considerably bigger than its nearest competitor in the business telecoms provider space, Cable & Wireless.
He pledged to address this with a focus on product development aimed at enterprise users, pointing to developments around unified communications.
“We have got the product set to go back into the enterprise market, because we pulled out of it a little bit in the last couple of years, and focused on public sector and mobile back haul,” Grace explained.
“It was the use of resource, it was about where we stood on our product set. We had taken our eye away from our product development, so we needed time to rebuild our roadmap, our lifecycle of product development.”
He added: “Over the next two weeks, we are launching internally six upgrades or new products to our product set, principally around connectivity and unified comms. That takes time to get through the machinery of our IT stack, but we are in a good place now so we think we can go back into the market and be aggressive in our growth.”
Virgin vs BT
One of the main drivers of revenue growth within Virgin Media Business has been in providing backhaul services for mobile operators. The signing of a £100 million deal with Mobile Broadband Network Ltd has enabled the firm to support the roll out of LTE services for 4G providers such as EE and Three. Grace intends to continue to capitalise on this “buoyant platform”, grabbing business from incumbent telco BT.
“As you can imagine, the data requirements on 2G and 3G are growing day-on-day, so what is it going to be like when 4G is finally rolled out properly? EE have been very aggressive in their marketing, and they have been very aggressive in their network rollout, and we have played a huge part of that.
Grace said that Virgin Media has stolen a lot of business from BT.
“Historically, BT has provided all the backhaul requirements for all MMOs, and we are taking big slices of that. We hopefully will take more as we continue our discussion with the other MMOs. That is a buoyant platform for us.”
Virgin Media Business has already gained a strong position in the public sector market, with successes in the Public Sector Network (PSN) such as a recent deal to provide connectivity to Yorkshire and Humberside councils.
“We have got market share of about 30 percent in the total local government market, so we are a significant player, and a significant number two to BT. It is not about going away and stealing BT’s lunch like it was with the mobile backhaul piece, it is about growing what we already have, taking it from some of the smaller players.”
Grace, who previously held the role of chief operating officer at Virgin Media Business, has been at the company in its different guises since 1995. This means that he has seen, and been part of, the improvements in the business since the days of NTL and Telewest that have led to Virgin Media attracting a takeover bid by Liberty Group earlier this year.
“What we have seen in the past six years is a company really mature, and deliver great customers service. I think we have really kicked on from the rebrand in 2007.
“We see our processes and procedures being much smoother than before. We are much more customer focused, we are successful in terms of our revenue growth, and I think that is all reflected in the price that we saw settled on as part of the Liberty transaction. There is a recognition that this is a company that has got a lot right over the last few years,” he said,
Although Grace would not be drawn on the ongoing strategic impact of the Liberty buyout, which is still subject to final approval, he said that the deal was likely to provide a boost for the wider business in future, and for Virgin Media Business in particular.
“We are viewing it very positively. Neil Berkett [Virgin Media CEO] talks about Liberty being a good home for Virgin Media. We view that absolutely in the same way in Virgin Media Business as in the consumer side," he said.
“There seems to be a lot we can bring to Liberty in the some of the B2B world, and that they can bring to us as well, because we seem to operate in different markets. There is a good bit of sharing of information and understanding that we can really push in the coming months and years ahead, if and when the transaction is completed.”
He added: “Mike Fries [Liberty Group CEO] has said he believes the whole of Virgin brings something to the Liberty party, and he looks forward to the mobile and B2B piece playing a bigger part in the whole group.”