Virgin Group and the mobile phone operator T-Mobile yesterday reached an out-of-court settlement of a long-standing dispute involving their Virgin Mobile joint venture, paving the way for the £1bn flotation of Sir Richard Branson's telecoms operation.
Virgin Group will end up with 100 per cent control of Virgin Mobile by buying T-Mobile's 50 per cent stake in the venture at a "minimal cost", sources say.
In return, T-Mobile - the operator formerly known as One2One in the UK and owned by Germany's Deutsche Telekom - will benefit from an ongoing network arrangement with Virgin.
It will also be entitled to receive 25 per cent of any value over £550m, although no more than £100m in total, "in the event of a flotation or trade sale of Virgin Mobile within the next two and half years".
Virgin is widely expected to float the Virgin Mobile operation - valued by analysts at up to £1bn - on the stock market although it has not yet formally started the process.
Yesterday's settlement, which brings to an end an extremely acrimonious dispute that has been going on for the best part of two years, was welcomed by all parties.
Sir Richard said: "We are delighted not only to have reached a settlement with T-Mobile but to have mapped out a secure and exciting future, one which sees us working more closely together."
Under the deal, T-Mobile will continue to provide network coverage for Virgin Mobile for at least 10 years although the deal is not exclusive so, in theory, Virgin Mobile could bring in other telecoms partners.
Virgin Mobile was set up in 1999 as an MVNO or a mobile virtual network operator - so-called because it does not own its own network. Instead it uses the T-Mobile network.
The deal also brings to an end certain marketing payments that T-Mobile had to make to Virgin Mobile and also ends revenues it got from inbound calls.
Brian McBride, the managing director of T-Mobile UK, said the deal provided "substantial benefits for all parties. Any disagreements of the past are well and truly behind us and we all look forward to a long and mutually rewarding relationship."
The relationship turned sour two years ago, when T-Mobile's British operation was headed by Harris Jones, and culminated in legal action. T-Mobile lost a case it launched against Virgin and Virgin Mobile - largely designed to end the pair's venture.
Virgin and Virgin Mobile hit back, launching a case against T-Mobile alleging breach of contract, which was due to be heard in the summer.
If Virgin had won that case, it could have forced T-Mobile to sell its share in the venture for a nominal sum. But since T-Mobile got a new boss in the UK, in the shape of Mr McBride, relationships improved dramatically and the spat was brought to a swift conclusion.
"They [T-Mobile] now get a relationship which will earn them a lot of money over time and it's better than not having a relationship at all, which is what they were faced with," one source said.
One of the terms of the out-of-court settlement is that there will be a party to celebrate the conclusion of the dispute, with Virgin Mobile picking up the bill.Reuse content