Virgin Media Shares Jump on Upgrade

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NEW YORK (Associated Press) - Virgin Media Inc. shares jumped on Tuesday after an analyst upgraded the British communications service provider's stock and the British government ordered British Sky Broadcasting PLC to cut its stake in independent broadcaster ITV PLC.

Virgin Media shares gained 65 cents, or 4.2 percent, to $16.08 in afternoon trading. The stock has lost about 50 percent from its 52-week high of $30 in early July.

BSkyB, a pay-television operator controlled by Rupert Murdoch's News Corp., is required to sell more than half its stake in ITV after its ownership was ruled anticompetitive and against the public interest.

Morgan Joseph & Co. analyst David Kestenbaum said he does not expect Virgin to pursue a bid for ITV, but believes the ruling "serves as a positive for the company given that the potential for Sky to influence ITV content has been removed."

Kestenbaum noted, however, that BSkyB may appeal the ruling, which may delay a final decision until closer to the end of the year.

Also Tuesday, Citi Investment Research analyst Michael J. Williams upgraded the company's shares to "Buy" and said the sell-off is "overdone."

"Under Neil Berkett, acting chief executive, Virgin Media is exhibiting a new pragmatism, acknowledging the need to enhance the value proposition to retain and grow the customer-base _ we welcome this change," Williams said. "In parallel, the advent of high-definition television and super-fast broadband services should, over time, demonstrate the capacity advantage of cable relative to both the satellite and telco platforms."

Williams also said he is less concerned about the effect of broader economic difficulties. He said Virgin Media's churn, or subscriber turnover, is stable and noted that the company reduced its bad debt provision in the third quarter, which indicates it is not experiencing an increase in disconnects related to nonpayment.

Williams also noted that he is "skeptical" about the possibility that Virgin Media will be targeted by an industry buyer. The analyst also balanced his "Buy" with a "High Risk" rating, due in part, to the company's debt levels and expected refinancing.

The analyst said that 2007 was a difficult year for the company, but said he is increasingly comfortable with consensus expectations going into 2008.

Kestenbaum, who maintained a "Buy" rating on Virgin Media, said he expects "flattish revenue growth" for 2008. Top of page

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