Steve Burch is a lucky man. Virgin Media currently has headhunters making discreet inquiries about finding a new chief executive to replace Mr Burch, yet just as they have begun to identify potential candidates, along comes private equity with a £5.5 billion offer and, rather than getting a severance package, Mr Burch stands to make nearly £15 million. But, then, that is the consistent pattern with the British cable business, where management is overrewarded for underdelivering.

To be fair, cable in Britain has always suffered by comparison with networks elsewhere. In the United States and Germany, the cable systems were laid a generation ago, well before they could be challenged by digital satellite platforms or DSL-upgrades to copper wire telephone lines. Along the way, nearly every cable operator has had to undergo a financial restructuring to absorb the costs of developing a national network. The result has been that companies such as Comcast developed both scale and financial strength before being hit by competition from satellite and broadband telephone networks. In the UK, cable started later. As a result, Virgin Media, even after absorbing and rebranding NTL and Telewest, has found itself fighting a battle on two fronts.

One is that it is weighed down by £6 billion in debt, meaning that it is forced to spend more time on financial restructurings than much-needed investment in content and operational improvements. The other is that it is the perennial also-ran in multichannel entertainment, lacking the scale to see off formidable competition from Sky. (BSkyB is 39.1 per cent owned by News Corporation, the parent company of The Times.) These problems may have been exacerbated by the legacy of a troubled merger, an overweening individual investor and a mediocre management, but they are structural. So why would the Carlyle want to make such a big offer for an indebted and outgunned company? The mooted private equity offer of $33.50 (£16.62) a share values Virgin Media at £2,500 per subscriber; by comparison, the market’s valuation is £1,400 per subscriber at Sky.

The answer is that Virgin Media has an enviable combination of assets for a converging world of entertainment and communication: it has all the elements of the quadruple play – television, telecoms, broadband and mobile; it has distribution over Freeview and over a pay-TV platform; it has a content business; and it has a brand. Carlyle’s gamble is that private equity can put the business on a stable financial footing and impose effective management, so that cable, finally, fulfills its long-heralded potential. It is a bold bet.

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