Liberty Global’s Mike Fries: ‘Virgin will be at 1Gbps before Eir’

9 Aug 2018

Liberty Global CEO Mike Fries. Image: Julien Behal

The gigabit broadband wars are approaching and Ireland will be centre stage, says Mike Fries, the CEO of Virgin Media’s parent company Liberty Global.

“Virgin will be at 1Gbps before Eir get to our level, I can assure you of that,” says Mike Fries.

Fries is one of the most powerful leaders in the global telecoms world, at the helm of a multi-billion-dollar cable TV and broadband footprint. And he predicts that 1Gbps broadband will be available across the Virgin network in Ireland (up from the average of 240Mbps today) before its arch rival in the Irish market, Eir, reaches that milestone.

‘Our largest competitor in Ireland is Eir. I know Xavier Niel well. I’m not sure which Iliad will show up yet, nobody does.’

It is a sunny Thursday morning in Dublin and Fries bounds into the room with the characteristic energy and sunny smile of an American businessman. His sartorial elegance and confident manners are a stark and welcome contrast to the social awkwardness, drab t-shirts and fleece vests beloved of the CEOs of household internet brands today.

Fries gets to the point and announces how happy he is about Virgin Media’s broadband business, the integration and rebranding of TV3 as Virgin Media Television, and the creation of a new sports channel, Virgin Media Sport.

His assessment of the Irish economy after days of meeting politicians, economists and business leaders: “Our view is that Ireland is in a great position with or without Brexit. I would be confident of the broader macro picture.”

Fries’ assessment is worth noting as the world’s geopolitical and socioeconomic tectonic plates are shifting and swirling at a frightening velocity. At the heart of everything is the internet and social media and, a world brought closer, more intimate and more immediate than ever witnessed in history.

And Fries controls many of these arteries of information.

The cable guy

Mike Fries, CEO, Liberty Global. Image: Julien Behal

Mike Fries, CEO, Liberty Global. Image: Julien Behal

Liberty Global is effectively one of the largest international TV and broadband companies in the world. It has operations in 11 European countries and 52m broadband, video, voice and mobile subscribers. Its annual revenues are $16.6bn.

Fries is also chair of Liberty Latin America which serves 9m internet, TV and mobile subscribers. He also sits on the board of Lionsgate Entertainment.

Liberty Global owns Virgin Media in Ireland and the UK. In Ireland, the company recently reported first quarter revenues of €109m and boasts more than 1m revenue-generating units from 438,200 cable subscribers, 372,000 internet subscribers, 355,300 telephony subscribers and 59,900 mobile subscribers.

Virgin Media has been quietly working away on its own £4bn plan called Project Lightning, which intends to bring 17m premises in the UK and Ireland into the 1Gbps sphere and beyond – or GigaWorld, as it calls it. It recently revealed that it has passed some 900,000 premises in Ireland with its fibre broadband network and is on the way to 1m premises passed by fibre as part of its Project Lightning roll-out.

In recent months, Liberty Global sold its businesses in Germany, the Czech Republic, Hungary and Romania to Vodafone for €18.4bn.

This all happening at a time when there is tremendous consolidation in the telecoms and entertainment world, with Disney buying Fox’s entertainment assets in the States for $71bn while Comcast battles with Rupert Murdoch’s 21st Century Fox to get its hands on European satellite broadcaster Sky.

Fries cuts through the confusion of all of this corporate manoeuvring with a frank adroitness. “On a global basis, there is a race for scale. Murdoch’s decision to sell Fox to Disney is an acknowledgement that, in the content business, you need global scale to compete with Netflix and others who are developing content for global narratives.

“In the distribution space, where Vodafone is buying our businesses in Germany for €19bn euro, the issue there is more about regional and national scale, not global scale. Because, in a market like Germany, we are very much a connectivity business. To be effective and competitive in connectivity you need to have reach in the country and then, more importantly, to blend or converge mobile and fixed. So, if I sell you broadband to your house but I want you to buy a mobile phone service from me, it is easier if I reach all the homes and not just a handful of them to create that bundle. It doesn’t make a lot of sense if I only reach a portion of the homes.

“In the case of Vodafone and Germany, we were quite small and we didn’t see an opportunity, as we have in Ireland, to get much bigger. And so, combining with a platform like Vodafone – which has a mobile franchise in 13 of the 16 federal states already networked – made a lot of sense for us as shareholders and, I think, for the industry and consumers. There was a lot of industry logic in that deal and it gives us flexibility to pivot, invest in other things and double down on markets.

“After that transaction, the Virgin Media platform in the UK and Ireland will be half of our European business so clearly we are focused, committed to this part of the world and to these two markets, and couldn’t be happier with the Virgin Media platform as it exists.”

A sporting bet on broadcasting

From left: Liberty Global CEO Mike Fries; Liberty Global chairman John Malone; and Virgin Media Ireland CEO Tony Hanway. Image: Julien Behal

From left: Liberty Global CEO Mike Fries, Liberty Global chairman John Malone and Virgin Media Ireland CEO Tony Hanway. Image: Julien Behal

The big priorities for Virgin Media in Ireland in the coming year are broadband, mobile and the TV rebrand with a new sports channel.

From a broadband perspective, the operator has been something of a dark horse, deploying fibre to cities and regional towns at a stealthy pace on its own steam.

The company’s launch in to mobile in the last year or so is still slow-going with close to 60,000 mobile subscribers as per the recent results. But Virgin Media Ireland CEO Tony Hanway maintained that there is plenty of room for growth. “We have favourable economics to grow. We prefer to have an MVNO (mobile virtual network operator) offering unlimited data. We would rather be sitting where we are: not cash negative. The vast majority of our customers are cable customers and there is nothing stopping us going into other areas.”

Virgin Media will be launching its new sports channel on 30 August and Hanway said that the broadcast team is energised. “Virgin Media TV already has a 20pc share of viewers in Ireland,” said Hanway. “Our goal is to drive that further.

“We are excited about the talent and the technology going into this. TV3 has gone from losing money to being quite a successful turnaround story. Sports is a natural extension of that.”

Fries chimed in that many important lessons for Virgin Media Sport will be gleaned from Vodafone Ziggo in The Netherlands, a joint venture in which Liberty Global has a 50pc stake. “Ziggo Sport has been successful in targeting regional and local sports.”

Hanway said that sports will be the bedrock of Virgin Media TV’s expansion. The package will include UEFA content and will broadcast over 320 matches a year. The channel will also be looking out for interesting local content. “We want to bring something unique and special to the market.”

Gaining the upper-hand in the gigabit economy

Returning to broadband, Fries said that 25pc of Liberty Global’s capital spend is going into broadband capacity, networks and future digital devices for the home.

In terms of the competitive telecoms environment in Ireland, Fries is clear that Eir (recently acquired by French telecoms billionaire Xavier Niel’s Iliad) will prove to be a difficult but worthy adversary as the market for gigabit broadband arrives.

“Our largest competitor in Ireland is Eir. I know Xavier Niel well. I’m not sure which Iliad will show up yet, nobody does. We compete with him in Switzerland and we were once in France, but we exited that market. We understand his style in Italy so we will see.

“This is a vibrant, competitive market and that’s good for consumers. We don’t shy away from competition, we welcome it and it is great for Ireland that there is a new player that is going to put money into the network and build up fibre, and that’s always good for us.

“Everywhere we operate – we are in 11 European markets – we can hold our own against any technology or operator. So we never try to discourage operators from coming in or competition from emerging. It’s good for consumers, its good for us and makes us better.

“Virgin Media today offers a 250Mbps product to pretty much everybody on the network. I think it is world class, what Irish consumers get here from Virgin Media.”

Crucially, as Fries said, all eyes need to be on the kind of telecoms company Iliad intends for Eir to be in the market. The battle over 1Gbps speeds will take place in the coming years .

“It won’t happen very quickly at Eir, no chance. It will take quite some time for them to reach that kind of capability, but we welcome it,” said Fries.

“Virgin will be at 1Gbps before Eir get to our level, I can assure you of that. And that’s great for consumers.

“So I think this is a market that is appropriately competitive. Consumers are going to benefit over the next five years from having two strong fixed infrastructure players with the mobility options and the content options and the sports rights.”

Globally, the battle will be around giving consumers the content they want. This is not an easy option when a lot of the market is being carved up by players like YouTube and Netflix – platforms that next-generation players like Virgin have to be benevolent towards by including them as apps on their set-top boxes.

“Video is particularly challenging across Europe and consumers have options like YouTube and Netflix. People are living busier lives that are much more digital. We have to lean in and invest in giving a better experience than anyone else. Our new Horizon 4 interface looks and feels as functional as anything you will see from Apple or Netflix.

“Our answer to disruption is to lean in and innovate and ensure there is no one with a content bundle like we have.”

While Fries is confident Ireland will weather the looming Brexit storm, he has to look at the impact of Brexit cumulatively across Ireland and the UK. He is pinning his hopes on a “smoother outcome” than people expect.

“Our biggest issue with the Brexit outcome is consumers and the impact it will have on their disposable income and on employment. Those are things that, even in the short term, we have to be sensitive to. It is important that consumers have choices and, even if there is disruption to their lives, they will have choices.”

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years