Branson calls in with £1.3bn price tag for Virgin Mobile

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The Independent Online

Sir Richard Branson has pencilled in a July flotation for Virgin Mobile and is aiming for a demanding valuation of up to £1.3bn.

Sir Richard Branson has pencilled in a July flotation for Virgin Mobile and is aiming for a demanding valuation of up to £1.3bn.

The business tycoon hopes to capitalise on the recent upturn in the telecoms market as the valuation is about £300m more than City analysts had first estimated the business was worth.

Virgin Mobile hasn't yet officially announced its intention to list on the London Stock Exchange. The company has got two teams working on ways to refinance the business: one through the debt markets and the other by listing shares.

But a source close to the company revealed that the management was now bullish about the prospects for a float. A formal announcement is due in the next three weeks.

Earlier this month, Virgin Mobile briefed analysts from Morgan Stanley, JP Morgan and Investec on its float proposals. The banks refused to comment, but they are expected to publish detailed reports on Virgin Mobile within the next fortnight. The three banks have also been tipped as the company's advisers for the float. The reports' conclusions will help Virgin Mobile pinpoint the exact value to put on the business.

Virgin Mobile has four million customers, and in January it estimated that its earnings would be around £100m this year. The company is a so-called virtual network operator. Unlike operators such as Vodafone, it does not own any masts or base stations and instead leases network capacity from T-Mobile. Virgin Mobile will be the UK's first virtual operator to float.

Some analysts are sceptical that Virgin Mobile will achieve a £1.3bn valuation. Mark James, telecoms analyst at investment bank Nomura, estimated that the business was worth around £1bn. He added: "It is still a buyers' market, so I think that Virgin Mobile should be priced at below fair value to allow investors to make some money."

Sir Richard is expected to retain a minority stake in the business and is planning to use some of the cash raised from the float to set up an airline in the US.

The way was cleared for a flotation of Virgin Mobile earlier this year when it ended a long-running commercial dispute with T-Mobile. The German company gave up its 50 per cent stake in Virgin Mobile. But, as part of the agreement, it stands to make up to £100m if the company floats.

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