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Virgin Mobile snubs NTL's overtures
$1.42bn "materially undervalues" us, says the board

By Reuters

Published: Thursday 08 December 2005

The board of Virgin Mobile rejected a $1.42bn takeover approach from UK cable operator NTL on Wednesday evening, saying it undervalues the company.

Virgin Mobile is 72 per cent owned by British entrepreneur Richard Branson, who had already agreed to swap his holdings for NTL stock and some cash if a deal proceeded. Gordon McCallum, representing Branson's Virgin Group, absented himself from the Virgin Mobile board's discussions.

NTL approached Virgin Mobile, the UK's fifth-largest mobile operator, with a cash or shares buyout offer on Monday, aiming to create a TV, internet, fixed-line and mobile phone powerhouse under the Virgin brand. NTL was not immediately available for comment.

In an emailed statement the company said: "The board has concluded that the potential offer materially undervalues Virgin Mobile."

One analyst said the decision suggested that Virgin Mobile would still be open to a deal at a higher price.

Charter Equity Research analyst Ed Snyder said: "Virgin is trying to start a bidding war by rejecting the offer on the premise that the price isn't right rather than saying the company is not for sale."

NTL is eyeing Virgin Mobile to add mobile services to its existing "triple-play" line-up of TV, internet and telephone services, giving it a potential advantage over rivals such as fixed-line telecoms carrier BT Group and satellite broadcaster BSkyB.

NTL shares were off 20 cents to $62.44 at 21:45(GMT) on Nasdaq.

Assessing the odds of a counterbid, Charter Equity Research's Snyder said more traditional fixed-line operators might be put off by the fact that Virgin Mobile does not own its own network but instead leases capacity from T-Mobile.

He said: "It's not an optimal solution for a large wireline carrier looking to get into wireless but the problem is there's not a lot of properties for sale."