Virgin Mobile 'could cut flotation price'

Virgin Mobile may be forced to cut its flotation price because of a lacklustre response from investors, it was reported today.

Earlier this month, the UK’s fifth largest mobile phone group put a range of 235p to 285p on its shares – due to begin conditional dealings on Wednesday.

But The Times said the mood among City analysts and fund managers was lukewarm, with one note yesterday putting the value of the stock at 160p.

A leading UK fund manager, who asked not to be named, also told the newspaper: “It’s too expensive, even at the bottom of the range. The main issue is that it’s priced at a premium to both Vodafone and mmO2.”

Richard Branson’s Virgin Group hopes to raise more than £250m (€375.4m) from the listing, which will fund expansion elsewhere in the business. At the proposed range, the move would value Virgin Mobile at around £960m (€1.4bn).

The operation was founded five years ago and differs from rivals such as Vodafone and mmO2 as a “virtual operator” which uses the network of T-Mobile. It has more than four million customers and employs 1,400 staff at three sites - Trowbridge, Wiltshire, London and Daventry, Northamptonshire.

David Buik of City bookies Cantor Index said a flotation price below 200p was unlikely to be considered as it would raise insufficient funds.

He said of the current price: “There is very little visible appetite from fund managers to buy stock in this mobile phone operator at this suggested level.”