NTL and Orange will launch a wireless joint venture in the UK next week.
Cable TV operator NTL and mobile giant Orange will launch a joint venture in the UK next week. NTL will offer mobile phones to its existing digital TV, cable Internet and fixed-line telephone subscribers. The monthly bills will be added to subscribers’ existing NTL bills.
It looks like a good move for NTL, which will widen its service, making it more attractive to users. Although BT has teamed up with digital TV operators BSkyB and ITV Digital to offer a package of telecoms and TV services, this offering goes further and is more closely integrated.
It will also help NTL achieve its target of improving average revenue per user (ARPU). The company has built up heavy debts over the last few years through building its customer base; now it needs to consolidate.
At the moment, an average NTL user spends GBP39 per month, while an average Orange user spends GBP21. Since Orange and NTL plan to split revenues 50-50, if the new customers spend a comparable amount, NTL’s ARPU could rise by around a quarter to approach GBP50 per month.
Of course, NTL is highly unlikely to migrate all or even most of its customers onto its mobile tariff. Many customers will already have mobile phones that they are happy with; others will have no desire to get one. However, enough people should accept the service to give NTL’s ARPU a welcome boost.
It’s less clear why the deal is good for Orange. While it will attract some revenues as people switch from rival providers to the joint venture, it also risks cannibalizing its existing customers for a service that will only bring in half the money.
The deal seems to be driven by France Telecom (FT), which owns 85% of Orange and 25% of NTL. It makes sense from FT’s point of view to help out NTL, since if the cable company fails to build revenues it risks defaulting on its debt. The cost to Orange, meanwhile, will be comparatively small.
