CEO of Virgin Media O2 Lutz Schüler: Connectivity is king

CEO of Virgin Media O2 Lutz Schüler: Connectivity is king

Wednesday, 6th October 2021
Lutz Schueler (credit: Richard Kendal)
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The CEO of the newly merged Virgin Media and O2 communications giant argues that he is a friend to everyone at Cambridge: producers and broadcasters all need better broadband.

Speaking 100 days after Virgin and O2 merged, the new group’s CEO, Lutz Schüler, said all the talk over the past few years may have been about content being king but, post-pandemic, it is time to crown connectivity, too.

“Connectivity was always important but I think we lost a bit of our importance because everybody was talk-ing more about the content or the value on top of our networks. I think now, after the pandemic, we have a second chance in life and we want to grab that,” said the German veteran who helms Telefónica and Liberty Global’s cable and mobile joint-venture.

Having stitched together broadband and mobile services before, at the Telefónica O2-owned German broadband provider HanseNet, Schüler has experience of combining mobile networks with cable, and says that Virgin Media O2 is “a power couple and the coolest gig to run in Europe for sure.

“We are maybe in the honeymoon phase but came very well… out of the blocks…. Timing is everything… our networks have kept the country connected during the pandemic.”

Schüler said the capacity used during the pandemic “more than doubled, basically overnight”, and, with so many people now working from home, there are opportunities in “the B2B sector, helping companies to find the right environment in which people can work together while still at home”.

His interviewer, Financial Times business columnist John Gapper, noted that Virgin Media O2 had a “limited footprint” and that, as rivals such as BT knew well, it was a “hugely expensive business” to put in more cable infrastructure.

“We’ve publicly committed [to] spending £10bn over the next five years,” replied Schüler. “We’ve increased the speed of our existing network very quickly, so more than 10 million households are able to surf at 1Gb speed.

‘Our networks have kept the country connected during the pandemic’

“We will have our entire network on 1Gb by the end of this year – that means close to 16 million homes. We announced 60 days after our merger that we will update our cable network to fibre. The benefit of that is you come very quickly from 1Gb to 10Gb speed.”

Schüler explained that the company is expanding its network “at a pace of 400,000 homes a year”, so to upgrade the whole UK would take 20 years.

“I’m retired in 20 years [and] I’m a very impatient person, so we are looking for ways to get the funding… for an additional 7 to 9 million homes.”

Gapper asked if 5G would be very different for consumers and content providers. “If we’re all honest, speed for the consumer is already sufficient,” Schüler replied, but stressed that response times from the network would be faster and more applications could be built in.

Gapper pointed out that, in the US, Comcast did not stop at infrastructure but moved into content; might Schueler do that? “Our clear strategy is a superior viewing experience.… We think we have the best connectivity in the country… then we have all the content the customer wants on that platform. I don’t think we need exclusive content. Never say never but, for my agenda, I would say no.”

“So you’re not just a frenemy, you’re a friend to people in this room?” asked Gapper. “I think so. We’re an aggregator working together with all of you… negotiating deals, sometimes haggling. We need the content, you guys need the platform – you need superior connectivity for your customers.”

He continued: “The next thing to come, and we’ve all joined forces here, is using the customer data and using only IP [internet protocol]. We have a lot of mobile customer relationships…. We have more than 47 million connections now, more than half of the country – let’s use that together.”

In 2018, Virgin and ITV were haggling about retransmission deals – they resolved that with a three-year deal, which Schüler revealed had been extended.

“We’re all moving to an all-IP world [with] advanced advertising [and] getting the data from the customer back to production. There’s so much stuff we can do together [so why] go back and haggle about retransmission fees; why waste our lives?”

From left: Lutz Schüler and John Gapper (credit: Richard Kendal)

He insisted: “Let’s innovate together. If we don’t… we will die. If we innovate together, we will create value [then] we will also compete internationally.”

With the rise of TikTok, was there still a real opportunity in mobile content, asked Gapper. “We believe in convergence. You see on the connectivity side that people want seamless connectivity,” said Schüler, adding that consumers still differentiated between content on the big screen and on the small screen – “particularly in the way they purchase content”.

“I don’t know about your family but, in my family, it’s a complete mess, right… in terms of how we manage the apps. We don’t have the answer [but] we’ve started to package Disney+ with our offers; we had huge success out of that.

“Can we help our customers who have seamless connectivity also get seamless access to content, and work with our content partners in a way that both screens are considered the right way? That would be fantastic. Am I sitting here with all the answers? No.”

Schüler also said Virgin Media O2 would soon be launching its “first IPTV offering, targeting the younger segment more”.

When asked what regulatory structure he would like to see, Schüler reminded Gapper that the Government’s subsidy plan to have 1Gb broadband in 100% of the UK by 2025 was toned down at the end of last year to 85%: “We will deliver more than 50% by the end of this year, so that thing is not solved.

“Huge investments are needed. Ofcom needs to keep looking [out] for the consumer but also to make sure we have an investment-friendly environment… it’s a balancing act.”

Session Twelve: ‘Global leaders keynote: Lutz Schüler’. The CEO of Virgin Media O2 was in conversation with John Gapper, business columnist of the Financial Times. The session was produced by Helen Scott. Report by Tara Conlan.