Virgin Mobile slides on revenue fears

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The Independent Online

Sir Richard Branson's Virgin Mobile upset the stock market by issuing lower-than-expected revenue guidance for the current financial year, sending its share price down 14.8p to 194.2p.

Sir Richard Branson's Virgin Mobile upset the stock market by issuing lower-than-expected revenue guidance for the current financial year, sending its share price down 14.8p to 194.2p.

Double the average number of shares were traded in the stock after the announcement, as investors anticipated a string of downgrades from analysts.

Sir Richard has had a rocky relationship with the stock market in the past and yesterday's update was the first major test of market sentiment towards one of the entrepreneur's biggest operations since its partial flotation two months ago. His Virgin Group still owns 75 per cent of the business.

However, Virgin Mobile privately believes a number of analysts have had unrealistically high forecasts on revenues, pushing the consensus estimate too high. Its pre-close update before interim results in November said revenue growth for the full year would be in the "high teens" compared with "mid-twenties" for the first half.

Analysts at Investec Securities, which helped handle Virgin Mobile's summer float, said: "While service revenue growth guidance in the high teens for 2005 is actually in line with our forecast, we are right at the bottom of consensus revenue forecasts at £528m. It is therefore likely that other houses will need to bring their own forecasts down, partly due to the impact of the mobile termination rate cuts."

Termination rates are the fees that mobile operators charge for switching calls from fixed line networks to their own. Ofcom, the industry regulator, announced some time ago these would have to fall.

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