Zacks_Analysts' Blog : Virgin Media to Enter Cloud Space - Analyst Blog

Virgin Media Inc. (VMED), the British cable and telecom giant, is on the verge to enter cloud computing services for its business customers. The company’s cloud services will be delivered through a virtual private data center that can be made operational within just 2 hours. To offer this innovative cloud computing, the company will utilize latest technologies of CenturyLink Inc. (CTL), the third largest wireline operator in the U.S. telecom operator. The major new innovation of this cloud architecture is its flexibility.

Enterprises can use this service to launch e-commerce facilities having the flexibility to increase their virtual server size once customer demand grows. Customers have the option to use flexible tariff structure, which will be billed depending on power usage instead of hardware usage. Virgin Media is planning to double its revenue from Business segment within next five years, using the cloud computing services. In the previous quarter, Business segment revenue inched down 1% year over year.

Virgin Media has revamped its business model as a pure-play service delivery and telecom carrier company rather than a content provider. In July 2010, the company sold the Virgin Media TV business to British Sky Broadcasting for approximately $234 million. In August 2011, the company sold its 50% stake in the UKTV to Scripps Networks Interactive Inc. (SNI) for approximately $452 million. The money raised from the sale will be used to expand its high-speed broadband networks.We believe cloud computing services will place Virgin Media head-on with BT Group plc. (BT), and Cable & Wireless Communications plc.

Earlier, Virgin Media announced a fresh capital return program of GBP 850 million. Out of this, GBP 625 million will be paid through share buy-back, which will be completed by end 2012. The remaining GBP 225 million will be paid through repurchase of the company’s debt and convertible securities.