It's good to talk - and eat and drink, says Virgin Mobile

Virgin Mobile will this week mark the latest stage in the decline of the wallet by unveiling a vending machine that can be operated by means of a cell phone.

Virgin Mobile will this week mark the latest stage in the decline of the wallet by unveiling a vending machine that can be operated by means of a cell phone.

Instead of using loose change to procure drinks, punters will purchase the machine's wares by dialling a specific number printed on its casing. The charge will then be debited automatically from customers' phone accounts.

Virgin Mobile, the cell phone venture which Sir Richard Branson launched in June of last year in conjunction with One2One, will unveil the innovation at this week's Live 2000 exhibition at London's Earl's Court. The other partners in the venture are Ericsson, the Swedish mobile phone manufacturer, and Vendapack, one of the world's leading vending machine operators. Virgin Mobile is billing the development as "the phone becoming the wallet", a spokesman said.

There are approximately 600,000 vending machines in the UK stocking everything from soft drinks and chocolate bars to toys and condoms. They are estimated to turn over around £1.3bn a year, a figure which is forecast to double within two years.

Virgin sells its branded Cola through Vendapack machines. If the experiment is successful, the first mobile phone-operated version will be unveiled later this year in one of Virgin's megastores. Vodafone and Orange, two other network operators, are understood to be hard on Virgin's heels in developing the new technology.

Virgin Mobile's venture is aimed at ironing out the inefficiencies which bedevil cash-based machines. These machines sacrifice 13 per cent of their revenue to fraud and another 9 per cent of turnover is affected by errors in giving change. Another benefit of the system will be to reduce both the cost of servicing the machines and the risk of theft.

Last October, Virgin Mobile was valued by Investec Henderson Crosthwaite, the stockbroker, at £1.36bn - even before it had sold a single phone. It has since become a pivotal part of Sir Richard's convoluted business empire. His Our Price music stores, which have been undermined by the decline in high street sales of compact discs, are expected soon to be reinvented as retail outlets designed in part to push sales of the network. Virgin Mobile had amassed more than 300,000 customers. Its service is sold via call centres, avoiding the commission charged by high-street mobile phone shops.