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Monday, August 27, 2007

Virgin Media: Trouble at the Top

Steve Burch has left the Virgin Media building. His ego might be slightly hurt, but I guess a reported US$7.5m payoff will alleviate the pain somewhat. If we add the payoff to the US$11.1m earnings in 2006 and the 125k shares (circa US$3.6m) he received in April 2007 equals a sum total of well over US$20m for 19 months work. I think this is great going for someone whose reign included a quad play loss of share in all core broadband, payTV, fixed and mobile telephony markets.

In an interview with the Financial Times this morning, the Acting CEO, Neil Berkett, said “I’m keen to treat this interim period as if I was chief executive…My focus is to accelerate delivery even more… We’re at an inflection point where we’ve rebranded and weathered the storm of Sky”. Personally, I can’t see any evidence of Virgin Media yet weathering the Sky storm, let alone the BT and TalkTalk storms and that is before the upcoming Digital Switch Over hurricane. Also being a little of a mathematical pedant, I would advise VMED shareholders that an inflection point could also imply things are about to get even worse.

I find it hilarious that The Sunday Times has been dishing out some free advice for the VMED board – more or less saying ignore the Chairman, James Mooney and let the business be run from the UK. I’m sure some VMED people will be thinking that if this is the advice of someone on Murdoch’s payroll, perhaps VMED should do exactly the opposite, which is maybe what Murdoch wants…

The most difficult part of Berkett’s job over the forthcoming months will be to keep the workforce focused whilst any boardroom shenanigans are fought out in private and future leadership is decided. The uncertainty of potential sale of the company will not help matters. The most important task is to keep on the cost reduction path, complete the synergy projects still outstanding from the ntl/telewest merger and find further ways of cutting costs. Regardless it is uncertain whether any of the synergies will ever find their way into shareholder pockets as the storm of competition is currently returning the synergies directly to customers in the form of cheaper cable bills.

Personally, I don’t envy the role of anyone at Virgin Media.