United Kingdom’s second largest pay-television and fixed-line telephone services provider, Virgin Media Inc (VMED) recently partnered with Cisco Systems, Inc (CSCO) to roll out its DOCSIS 3.0 technology as well as to provide high speed network service to its subscribers.
During a trial for this new technology, the company achieved a record downloading speed of 1.5 GB. Cisco, one of the leading suppliers of Internet protocol (IP)-based networking, has achieved such a feat by applying its advanced Broadband Processing Engine (BPE) called 3G60 line card, which is cost efficient and offers high speed service to its clients. It also supports IPTV services to its pay-TV users, thus making it more cost effective in such stiff competitive market.
Virgin Media is gradually deploying the super-fast DOCSIS 3.0 network, offering downstream speed of 100 Mbps and upstream speed of at least 10 Mbps. 100 Mbps tier now encompasses approximately 2 million customers and will be available across the U.K. by mid-2012.
From December last year, Virgin Media has started offering a next-generation web TV platform to its subscribers through TiVo Inc’s (TIVO) industry leading set-top boxes. So the success of this venture with Cisco will boost the company’s network support and will enable them to offer such extended services to its customers going forward.
However, we believe that increased churn rate and lower subscriber additions coupled with extremely competitive UK telecom market will act as headwinds for the stock going forward.
We, thus, maintain 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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