NTL in talks to buy Virgin Mobile for £817m

Having just bagged Telewest, NTL now has its sights on Virgin Mobile.

The broadband provider officially revealed its interest in the mobile virtual network operator (MVNO) on Monday, saying it is prepared to offer shareholders 0.09298 NTL shares or 323p in cash for each Virgin Mobile share, valuing the company at £817m.

Virgin Mobile, which is owned in part by the Virgin Group, verified the approach in a statement: "The board of Virgin Mobile Holdings... confirms that it has received an approach from NTL that may or may not lead to a formal offer being made for the company", adding that it will confirm the outcome of any talks with shareholders when appropriate.

Should the deal go ahead, Virgin Group would swap the majority of its shares in Virgin Mobile for "a continuing equity participation" in NTL, the broadband firm said, and some cash.

Shares in Virgin Mobile rose by seven per cent on the news yesterday, while NTL's climbed slightly, by less than one per cent.

Should the acquisition come off, NTL will then use the mobile provider to sell 'quadruple play' services -- mobile and fixed telephony, Internet and TV.

"NTL already has a licence agreement with Virgin Enterprises for the exclusive use of the Virgin brand in the broadband area and is in discussions with Virgin Enterprises to extend that licence to cover television and fixed line and mobile telephony," the company said.

Sue Richardson, principal analyst at Gartner, said the move was a predictable one for NTL. "It's not hugely surprising. You kind of expect them to start being more strategic [since the Telewest acquistion]. Looking at a mobile play would fit with a competitive, forward-looking stance."

"This is a chance to reach new customers and add a Virgin Mobile option to their existing customers," she added.

The cable company's potential acquisition of Virgin Mobile adds yet more fuel to the mergers and acquisitions rampant in the telecoms sector, such as Telefonica's £17.7bn acquisition of O2, Sky's buy of Easynet for £211m and NTL's own $6bn union with Telewest.