Virgin float heralds swag of sales

By DAMIAN REECE

Sir Richard Branson is set to follow the £1 billion ($2.85 billion) British float of Virgin Mobile, announced yesterday, with an initial public offer for his American cellphone business.

Branson is looking at floating Virgin Mobile USA - a joint venture with Sprint - in the early part of next year with an expected value of US$2.5-3 billion ($3.9-4.7 billion).

The American operation, started in the summer of 2002, is expected to break into profit in the final quarter of this year.

A spokesman for Branson confirmed that the US mobile operation was the next likely float from the Virgin Group.

Another likely Virgin sale is Trainline.com, the ticket booking and information service in which Virgin holds an 84 per cent stake. It is expected to be sold next year.

Branson's spokesman said the expected £400 million proceeds from the Virgin Mobile float in Britain would be used to reinvest in various projects as well as bolster the group's cash reserves, kept at about £200-300 million.

New investments will include Virgin America, described as a "high-quality, low-cost" airline in the US, and an expansion of Virgin Group's cellphone interests in Canada, Africa and China.

"We are also husbanding a lot of resources for an African low-cost airline while maintaining our war chest of resources," said the spokesman.

The sale of a stake in Virgin Mobile is the latest in a long line of realisations in recent years for Branson. But he has also been busy forming new companies and expanding existing ones.

His venture capital empire, which uses the Virgin brand to promote a range of products and services, now includes cellphone operations in Canada, the US and Australia.

Virgin owns 75 per cent of its Australian telecoms operations with Singapore Telecom.

As well as owning airlines, the group includes Virgin Money, a savings and credit-card business, Virgin Rail, a joint-venture with Stagecoach, and V2, a record company.

It owns the Virgin Megastore retail chain and controls Victory Corporation, the cosmetics and clothing company.

Other investments include Virgin Pulse, a US consumer electronics group, and Virgin Active health clubs. It still has Virgin Radio in Thailand and China.

Yesterday's announcement fleshed out some of the detail for the Virgin Mobile float, which is expected to value the company at £1 billion, but it carries £300 million of debt.

Another beneficiary of the float will be Deutsche Telekom, which owns Virgin's network partner in Britain, T-Mobile.

The German company is in line to receive 25 per cent of any valuation of Virgin Mobile over £550 million. At a value of £1 billion, that would imply a windfall of £112.5 million for T-Mobile.

Branson wrested 100 per cent control of Virgin Mobile from T-Mobile after an out-of-court settlement in January following a long running dispute between the two.

The settlement involved Virgin buying T-Mobile's 50 per cent stake in the joint-venture for a "minimal cost" in return for agreeing to pay T-Mobile a sum related to the company's future value on sale or flotation.

Virgin Mobile said yesterday that a global offering of its shares should be completed this month.

Launched in 1999, Virgin Mobile is now Britain's fifth-largest mobile operator with about 4.1 million customers. It piggybacks on T-Mobile's network and pays the firm for carrying its calls.

The chairman of Virgin Mobile will be Charles Gurassa, with Branson as honorary president. Gurassa spent 10 years at British Airways, one of Virgin's most bitter rivals.

- INDEPENDENT