£500m Virgin deal to end phoney war with T-Mobile

T-Mobile is in talks to sell its half share in Virgin Mobile back to Sir Richard Branson's business empire for up to £500m.

A deal would signal the end to three years of hostilities which have already led the companies to face each other in the courts twice.

Brian McBride, the managing director of T-Mobile UK, confirmed that talks were under way to sell the stake. "There are a number of issues to be resolved, but we are working through them in a cordial way," he said. "If we sell the stake back to Virgin then we will look for better day-to-day terms."

A sale would allow Sir Richard to float Virgin Mobile on the Stock Exchange next year.

Virgin Mobile is a virtual operator, owning no phone masts or base stations. Instead, T-Mobile carries all its calls. The complex dispute between the two companies centres on how Virgin Mobile's revenues are distributed. Insiders said that relations had improved with the arrival of Mr McBride, who replaced Harris Jones this summer.

A spokeswoman for Virgin Mobile said: "We are dealing with T-Mobile on amicable terms and negotiations have improved markedly."

Despite this, the companies will face each other in the High Court tomorrow in a case outstanding from their earlier row. The dispute is over the definition of a Virgin Mobile customer. T-Mobile pays Virgin Mobile money for every customer - to be spent on marketing. The courts will decide how long Virgin Mobile subscribers can go without making phone calls before they are no longer classed as customers.

T-Mobile will today become the first phone operator to launch a pay-as-you-go service offering subscription call rates. It is expected to spark a pre-Christmas price war.

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