Carlyle is chasing U.K. cable company

John Malone and Rupert Murdoch may be squaring off yet again — and this time the battleground is Blighty’s pay TV industry, which Murdoch has long dominated.

Malone is joining a list of private equity groups kicking the tires at Virgin Media, the British cable group formed from the merger of NTL and Telewest, which is the only real competitor to News Corp.-backed satcaster BSkyB.

Malone has good reason for his interest in the cabler, which would be rolled into his Liberty Global group of international TV assets.

In an interview with the London Financial Times, he described the U.K. market as “big and complex,” adding that Virgin Media “has a lot of interesting financial attributes” — a reference to an estimated $24 billion of debt accumulated by Virgin that could be used to offset tax on future profits.

Malone added: “We have to look at it, not in a traditional way, but in a quite exceptional way, perhaps with partners.”

Liberty Global may also be able to use the turmoil in global credit markets, which has diminished the prospect of a private-equity leveraged takeover, to find a private-equity group partner in the takeover and pick up Virgin for a song.

Others interested in Virgin Media, whose biggest shareholder is entrepreneur Richard Branson, include a consortium made up of Providence Equity Partners, Kohlberg Kravis Roberts & Co. and the Blackstone Group. Apax Partners is also interested, although TPG is said to have backed out.

First-round offers for Virgin Media, which is being advised by Goldman Sachs and UBS, are due this week. But analysts suggest the cabler will try to prolong the auction in the hope that credit markets improve and more private-equity players return to the fray.

Liberty Global already has pay TV interests in much of Europe, Japan and Latin America. But Malone has so far been thwarted in the important territories of the U.K. and Germany.

Malone is not underestimating the battle with BSkyB, as Virgin Media continues to struggle against the behemoth.

“The bottom-line issue is, can anything flourish under the Death Star?” said Malone, comparing BSkyB with the “Star Wars” super weapon.

“There’s a high level of radiation that’s coming down (from BSkyB). The concentration of market power that’s been created means you have to scratch your head and say. ‘Can anything compete?’ “

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