Virgin Media Inc. (VMED) – a leading entertainment and communication service provider in the U.K. is planning to charge people for using its WiFi underground network in London from January 2012 onwards.
Higher adoption of tablets and smartphones has propelled demand for internet data, thereby exerting more pressure on network traffic. Moreover, with the growing popularity of numerous social networking sites, people always like to stay connected with their loved ones, which isn’t always possible, at times when they are in an underground metro due to network unavailability. More than 700,000 people using underground metro remains connected to Wi-Fi network.
So, by looking at the needs of the people as well as by shifting the huge data load from its network, Virgin Media has rolled out Wi-Fi network services in and around the city of London especially at underground metro stations where the network is quite weak.
Previously, Virgin Media had set a target of offering its Wi-Fi network services across 120 underground metro stations by the end of 2012. Till now, the company has been able to cover 72 stations and plans to add 20 more stations by the end of this year with further inclusion of 28 stations by the beginning of next year.
Earlier, the Wi-Fi network service was freely available to other telecom subscribers. However, from the next year onwards they will be charged £2 per day, thereby creating another revenue stream for the company going forward.
However, the underground Wi-Fi network service will remain free for its own broadband and mobile customers, Vodafone Group (VOD) and EE telecom subscribers.
However, we also remain highly apprehensive about the success of the new revenue stream as both Vodafone and EE, will get the underground WiFi service free of cost, which constitute 76% of the total customers in Greater London.
We are maintaining our long-term Neutral recommendation on Virgin Media Inc. Currently; it has a Zacks #3 Rank, implying a short-term Hold rating on the stock.
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