£1.6bn float for Branson's US phone firm

SIR Richard Branson has given the go-ahead for the £1.6bn flotation of his highly successful US mobile phones operation. Virgin Mobile USA, his joint venture with American phone giant Sprint, has picked investment banks Merrill Lynch and CSFB to organise the deal, which is due for the last quarter of this year.

JP Morgan and Merrill Lynch are also advising on raising extra debt finance or a bond issue to help fund expansion.

The US operation, which is separate from London-listed Virgin Mobile, has about 3.5m customers and has been among the fastest-growing companies in America since its launch three years ago.

Turnover last year was more than £526m, according to Branson, though Virgin Mobile USA has never published figures. Analysts estimate it could join the market with a value of £1.6bn.

The company, like Virgin Mobile, is a virtual network operator. It buys airtime wholesale from Sprint, but is responsible for marketing and customer service. Also in common with the British company, it has heavily targeted the youth market. Only 20% of Americans under 35 have a mobile phone.

A successful US float would be a huge boost for Branson, who could use the funds to back his ambitious space tourism plan, Virgin Galactic.

Virgin Mobile faced a stormy reception when it listed in London last July. Shares were priced at 200p compared with the 235p-285p mooted in the original prospectus and they fell below the float price last October.

It faced pressure after its first trading statement predicted percentage subscriber growth in the 'high teens', which disappointed some analysts. The price recovered to peak at 275p in January and closed on Friday at 220¼p, valuing the group at £551m.

Virgin Mobile is likely to announce plans soon to enter the contract market, where there is much more profit in signing up customers with long-term agreements.