Investopedia: Should Debt Matter At Virgin Media?

In some respects, cable TV/Internet businesses ought to work like utilities. It takes a lot of capital to build the infrastructure, but once it's in place customers send in monthly checks like clockwork. It's never quite worked out that way, however, as seemingly never-ending capital demands have prevented many of these companies from turning into steady dividend-generating machines.

Virgin Media (Nasdaq:VMED) is an interesting case study. On one hand, the company's high-quality network is valuable and the company has consistently delivered on ARPU. On the other hand, the company faces competition from conventional competitors such as British Sky (Nasdaq:BSYBY) and BT Group (NYSE:BT), as well as content rivals such as Netflix (Nasdaq:NFLX), Amazon (Nasdaq:AMZN), Google (Nasdaq:GOOG) and Apple (Nasdaq:AAPL). Worse still, the company's huge debt load crushes a discounted cash flow model - leading to the question of how much debt should matter to investors.

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