Virgin Mobile details float plans

Virgin Mobile today kicked off plans for a London stock market flotation in a move valuing the company at up to £1bn (€1.5bn).

The listing of the UK’s fifth largest mobile phone group will be the first by part of Richard Branson’s empire in London for 18 years.

Conditional dealings will begin on July 21 with shares given a 235p (€3.50) to 285p (€4.30) price range today.

As much as £279m (€417.9m) will be raised by the listing to fund expansion within the Virgin Group of businesses which includes airlines, music stores and credit cards.

Virgin Mobile was founded five years ago and differs from rivals such as Vodafone and mm02 as a “virtual operator” which uses the network of T-Mobile.

The company will have a market value of as much as £713m (€1.1bn) following the flotation, although its enterprise value will be higher at up to £1.02bn (€1.5bn) after taking account of £311m (€465.7m) of debt.

Employees are set for a windfalls of up to £3,000 (€4,500) as Virgin has pledged to make a gift of free shares following the listing.

The operation employs 1,400 staff at three sites – Trowbridge, London and Daventry – and has acquired around 4.1 million customers.

In the year to March 31, it generated turnover of £453.3m (€678.8m) and operating profits of £63.2m (€94.7m).

Around 95% of its business is derived from customers buying pre-pay vouchers to top up the credit on their mobile phones.

Virgin has drawn up a strategy that includes moving into the market for contracts where customers agree to take a service for a fixed period of time.

Jim McCafferty, of stockbrokers Seymour Pierce, said this would guarantee the operator a visible stream of revenues and enable it to act more aggressively on price.

“It’s a signal that the cosy cartel-like days of the mobile phone industry are set to end and this could be good news for consumers,” Mr McCafferty said.

The strength of the brand and an intention to trump rivals by paying attractive dividends should underpin interest in the shares, he said.

But the lack of a wholly-owned network meant the company would be unable to respond to customer needs by increasing investment as swiftly as its rivals, he added.

“If T-Mobile decides to cut back on its capital expenditure programme then Virgin cannot do anything about it,” Mr McCafferty said.

The decision to seek a stock market listing follows the flotation of Australian discount airline Virgin Blue last year.

Branson is expected to become the honorary president of the business, with former British Airways executive Charles Gurassa appointed chairman.

Chief executive Tom Alexander said: “We believe that we have an exciting business and are confident about our growth prospects.”