Virgin Mobile reports record growth to boost IPO prospects

29 Jan 2004

UK MVNO Virgin Mobile has posted its best quarterly sales in its four-year history, revealing that it added more than half a million customers in the final three months of 2003 to add credence to its self-proclaimed title of the UK’s fastest growing cellco. Virgin Mobile added 506,448 net new customers in 4Q 2003 to take its total base to 3.645 million, more than double the number that it had started 2003 with. The operator attributed much of its success to a number of high profile promotions, including its own loyalty rewards scheme, discounted text messaging and cross-promotions with Virgin’s other retail operations.

The news will enhance Virgin Mobile’s prospects in its proposed stock market floatation, currently on hold whilst its 50-50 owners T-Mobile and Virgin Group attempt to finalise an out-of-court settlement that will allow the latter to take full control of the operator. It is expected that the deal will see Deutsche Telekom-owned T-Mobile agree to sell its stake in the MVNO, currently valued at around GBP1 billion, to Virgin Group in return for an initial upfront payment from the sale of its interest; the balance would follow subject to the outcome of a successful IPO.

UK-based entertainment conglomerate the Virgin Group announced the formation of Virgin Mobile with T-Mobile in June 1999. The deal was finalised the following August once Deutsche Telekom’s purchase of One 2 One had been ratified. The company launched over T-Mobile’s network on 12 November 1999, following an initial investment of GBP100 million from both parent companies; T-Mobile is responsible for the infrastructure, while branding, customer service and billing are entirely down to Virgin.

Regardless of the outcome of Virgin Group’s takeover bid, the two parents inked a fresh and more comprehensive network sharing deal earlier this month, that is designed to remove the threat of further legal disputes, and will see T-Mobile continuing as the sole provider of voice calls for the next few years. Under the terms of the new agreement, a controversial clause requiring T-Mobile to make fixed monthly payments to Virgin to compensate for revenues the former received for incoming calls has been taken away. Instead Virgin Mobile will receive payments in relation to the actual value of the inbound call.

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