UBS report picks Sky to beat Virgin

The bitter battle between Sky and Virgin Media appears to be benefiting the satellite television operator with a new survey suggesting that almost half of Virgin's customers want to switch providers.

UBS, the Swiss investment bank, commissioned research company GfK NOP to survey 1,000 households in the wake of the dispute between the two companies. The survey found that 45 per cent of Virgin's television customers would switch provider if they could while 10 per cent planned to quit as a direct result of the removal of Sky One and other channels from Virgin's television service. The dispute has left Virgin customers without access to hit shows such as 24 and Lost.

The investment bank added that Virgin was suffering an "identity crisis" as Sky's launch of broadband and voice services had taken its unique selling point as a "triple-play" provider. Thus it argued that Virgin is exposed to competitive pressures with customers surveyed perceiving that Sky offered better customer service and product.

"Our survey strongly suggests that Sky customers do not see Virgin as a credible alternative," UBS said, adding that 400,000 Virgin customers could defect to Sky. Shares in the satellite television company gained over 3 per cent to 660.5p as a result of the bank's comments.

However, the survey also found that 14 per cent of households "appear to have an ideological aversion to Sky and are unlikely ever to subscribe".

Virgin Media dismissed the research as out of date, sensationalist and unrealistic. A Virgin media spokesperson said: "The headline projections UBS has driven off this sample group should be treated with extreme caution. As we have said, the full impact of the loss of Sky's withdrawal of its basic channels will be seen in the second quarter. We have seen a significant drop-off in call-centre activity since March/April when this survey was carried out and, based on actual customer behaviour to date, we believe TV customer losses have been contained to a fraction of that suggested by UBS."

Nevertheless, the investment bank upped its growth forecasts for Sky and said the research suggested that up to 60 per cent of UK households are willing to subscribe to pay-television.

Virgin Media, headed by Stephen Birch, has warned that it could lose television customers over the next three months as a result of its disagreement with Sky. The spat between Virgin Media and Sky relates to the carriage fees that the companies charge each other to broadcast channels. Virgin has accused Sky of trying to stifle competition by charging excessive fees for its basic channels and has taken legal action against its rival.