Branson to wage phone war on BT

Sir Richard Branson is planning to take on Sir Christopher Bland by pitting Virgin against BT in the fixed-line telephone market in the New Year. Sir Richard told the Independent on Sunday that he intends to capitalise on Virgin's success in mobile phones and the oil and gas area to challenge BT head-to-head.

The Virgin tycoon, on his holiday island in the Caribbean, said his empire, which he now describes as a "branded venture capital business", will "extend into the fixed-line telephony market next year".

Virgin plans to sell branded deals for home phones, undercutting not only BT but also the cable groups, NTL and Telewest, by buying spare capacity on the phone network. It is also likely to offer broadband internet access, known in the industry as ADSL. Sir Richard has already shown the Virgin brand can be a prime mover in the telecoms area with the successful launch of Virgin Mobile.

Piggybacking on the One2One network, Virgin Mobile has more than a million subscribers, having grown by more than 50 per cent in the first half of this year, reveal figures this week by Continental Research.

Sir Richard has also signed a deal with Sprint, the US operator, to launch Virgin Mobile in the US and is hoping to sort out a deal to expand the business in France and other parts of Europe.

This growth has come at a price. The UK business cost £80m to set up and the US operation is expected to need some $400m (about £280m) of investment.

These cash demands are behind Virgin's recent moves to build up a war chest, raising £75m from banks through mortgaging part of Sir Richard's stake in Virgin Atlantic, the airline, selling the Virgin One banking business and the Virgin Megastores in France last week.

Sir Richard said it was a coincidence that both deals came last week. "We are a branded venture capital business," he said. "We capitalise on our opportunities and make most of our money from disposals."

The cash raised in the last few weeks gave Virgin opportunities to expand in recessionary time, when other companies would be cutting back their investment. But Sir Richard said it was not in Virgin's nature to make large acquisitions.

He said that despite the sale of Virgin One to Royal Bank of Scotland, he would be developing the financial services business, initially with projects in France and South Africa. "The UK has been a test bed; we are taking the Virgin One concept around the world," he said. And Virgin may increasingly focus its expansion abroad because of the brand's high UK profile.

"The brand is purer outside the UK because of all the publicity we get here. It is cleaner and fresher abroad than at home. In the UK we have covered most sectors." But this overseas emphasis will come too late for BT to avoid getting the Virgin treatment.