Virgin Media Inc.
), one of the leading entertainment and communication service
providers in the U.K, is planning to lease out its Wi-Fi mobile
network, which are placed in the London Underground stations. We
believe that renting out its network to other operators will act as
a new revenue stream for the company in addition to the revenue
opportunity from the existing Wi-Fi customers.
Earlier, Virgin Media had won the contract to roll out Wi-Fi
network in and around the city of London and in the process had
BT Group Plc
) owned O
. During the Olympic Games, commuters using laptops, mobiles and
tablets in the Underground tunnel can access the internet for free.
However, once the Olympics conclude and the free service expires,
the company plans to rent out its Wi-Fi network to rival operators
), BT, O
, and TalkTalk. The company has initiated its bidding process under
a wholesale agreement, which is expected to be launched in
Increase in adaptation of tablets and smartphones has led to an
unprecedented demand of internet data, which in turn requires good
connectivity. It is expected that popularity of Wi-Fi service in
London could create a shortfall of network capacity. So the
operators need to continuously invest in network expansion.
We believe leasing out its network will provide Virgin Media
with the additional funding required for maintenance and further
enhancement of its capacity. The company plans to launch the
service in 80 Underground stations by July, which could go up to
120 by the year end, making London one of the most connected
Furthermore, the proposed wholesale model could be a win-win
situation for Virgin Media and the other bidding companies. Virgin
Media can provide Wi-Fi accessibility to its customers, either free
of cost or on a pay-as-you-go basis, while other companies can
offer the service using their own brand. We believe that sharing
the Underground Wi-Fi network will relieve the pressure off mobile
networks. However, it might also increase competition resulting in
reduction in the tariff for the service.
We are maintaining our long-term Neutral recommendation on
Virgin Media Inc. Currently, Virgin Media Inc has a Zacks #3 Rank,
implying a short-term hold rating on the stock.
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