United Kingdom’s second largest pay television and fixed-line telephone services provider, Virgin Media Inc (VMED), recently won a legal battle against Gemstar-TV Guide International, a subsidiary of Rovi Corporation (ROVI).
In 2008, Gemstar, which is now a part of U.S. based Rovi Corporation, sued Virgin Media for violating its patent rights. Gemstar, popularly known for its Electronic Programme Guides (EPGs), supports interactive on-screen menu systems mostly used by television companies globally.
Gemstar claimed that Virgin Media used certain features like screen navigation, favorite lists and programme recording in their set-top box, which was similar to their features. The long-held legal battle finally came to an end as the court of London declared those patent litigations as invalid and ruled it in favor of Virgin Media.
Virgin Media reported excellent results for the fourth quarter of 2010. Both revenue and EPS exceeded the Zacks Consensus Estimate. The company’s bundled service offerings are getting increasing market traction. Customers are now more inclined to spend on high-margin premium services that offer faster speed.
However, increased churn rate and lower subscriber additions still remain a concern. The UK telecom market is extremely competitive with low barriers to entry. YouView, which is a joint collaboration between the BBC, ITV, Channel 4, BT Group, Talk Talk and Arqiva has become a major threat to Virgin Media. Keeping these factors in mind, we prefer to remain on the sidelines.
We, thus, maintain our long-term Neutral recommendation for 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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