Mobile phone group may start service withVirgin

EUROPEAN TELECOM, the fast-growing mobile phone distributor, has held talks with Richard Branson's Virgin group about launching a mobile phone service based on the Virgin brand, writes Peter Thal Larsen.

"We've had two discussions with Virgin with regard to mobile telephony," Warren Hardy, European Telecom's chairman and chief executive, said yesterday, adding that talks were still at an early stage.

Mr Hardy said the company was looking at providing a service to Virgin in which European Telecom would purchase mobile phones from manufacturers, distribute them, and handle after-sales and repair. The company has just won a similar three-year contract to provide a similar service to Connect Austria, a newly licensed network operator in Austria.

Virgin has recently made it known that it is considering a move into mobile phones, and may be part of a consortium which bids for the next generation of mobile phone licences. The licences, known as Universal Mobile Telephony Services, will support high-speed data transmission, enabling users to surf the Internet and watch video on their phones. They are set to be auctioned off by the Government next summer.

Virgin is unlikely to build a new network. However, it may link up with an existing operators such as Cellnet or Vodafone and rebrand phones which use their network with the Virgin brand.

A part in this set-up would be a boost for European Telecom, since it would receive a regular service charge for each phone it managed. The group currently earns most of its revenues by distributing phones, although it recently linked up with NatWest to offer phones which allow users to check their bank accounts.

The group, which topped The Independent 100 list of fastest growing companies in 1997, yesterday reported a 33 per cent jump in operating profits to pounds 6.4m for the year to last March. Revenues were up 30 per cent to pounds 187m.