News 2004
Virgin Mobile announces price range
07/07/2004
A press conference will be held at 10.30am today at Vinopolis, 1 Bank End, London SE1 9BU, with a photocall with Virgin Mobile management at 10am.
- Indicative price range of 235p to 285p per share
- Global offer of up to 98m shares, excluding any shares offered under the over-allotment arrangements
- Over-allotment arrangements for up to 15% of the Global Offer
- Enterprise value of between £900m and £1,025m
- Existing shares to be offered to institutional investors in the UK and internationally
- Eligible Virgin Mobile employees will be entitled to a gift of free shares following listing
- Pricing expected to be on 20 July 2004 and conditional dealings expected to commence on 21 July 2004
Virgin Mobile Holdings (UK) plc (“Virgin Mobile”), the UK’s largest mobile virtual network operator (MVNO), today announced the launch of a global offering of existing shares to institutional investors (the “Global Offer”) with an indicative price range of 235p to 285p per share, giving Virgin Mobile an enterprise value of approximately £900m to £1,025m (based on illustrative unaudited pro forma net debt as at 31 March 2004 of £311m) and an equity value of £588m to £713m.
The Global Offer consists of a secondary offering of up to 98m shares (excluding the shares that may be acquired under the over-allotment arrangements) which, taking account of the price range of 235p to 285p, equates to proceeds of £230m to £279m. Proceeds will be received by the selling shareholder, a member of the Virgin Group of companies. In addition, over-allotment arrangements will be entered into on behalf of the underwriters of the Global Offer with the selling shareholder for the possible acquisition of up to a further 14.7m shares.
Virgin Mobile staff employed by the company on 1 July 2004 and still employed at the time of Admission will be entitled to receive a gift of free shares following listing.
The free float, prior to any exercise of the over-allotment arrangements, is expected to be approximately 37% on a fully diluted basis. If the over-allotment arrangements are exercised in full, the free float is expected to be approximately 43%.
Pricing and allocation are expected to be on 20 July 2004, with conditional dealings expected to commence and listing particulars expected to be published on 21 July 2004. Admission to the Official List of the UK Listing Authority and trading on the London Stock Exchange plc’s market for listed securities is expected to take place on 26 July 2004.
JPMorgan and Morgan Stanley have been appointed as joint global co-ordinators, joint bookrunners and joint sponsors of the Global Offer. Investec has been appointed as co-lead manager. JPMorgan, Morgan Stanley and Investec Securities intend to act as underwriters.
Commenting on the announcement, Tom Alexander, CEO of Virgin Mobile, said:
“We are delighted to be able to publish details of the offer, which will allow new investors to participate in the future growth of a mobile business with a strong brand, more than four million customers and an aim to give the best possible customer service. We believe that we have an exciting business and are confident about our growth prospects.”
The illustrative unaudited pro forma net debt as at 31 March 2004 of £311 million referred to above assumes that a number of transactions, including a refinancing and the Global Offer have occurred. Further details of these transactions and the information required to determine this unaudited pro forma figure will be included in the listing particulars expected to be published on 21 July 2004. Such listing particulars will also include detailed information about Virgin Mobile, its historical financial results, its prospects and the risks relating to an investment in the ordinary shares.
Expected timetable
| Roadshow commences | 7 July |
| Pricing | 20 July |
| Conditional dealings commence | 21 July |
For further information contact:
| Virgin Mobile | Steven Day |
| 07931 777777 | |
| Alison Bonny | |
| 07802 430276 | |
| Finsbury | James Murgatroyd |
| Julius Duncan | |
| Don Hunter | |
| 020 7251 3801 | |
| JPMorgan | Ian Hannam |
| Adam Bagshaw | |
| 020 7325 1168 | |
| Morgan Stanley | Scott Bruckner |
| John Porter | |
| 020 7425 8000 | |
| Investec | Chris Godsmark |
| 020 7597 5000 | |
The contents of this announcement, which have been prepared by and are the sole responsibility of Virgin Mobile, have been approved solely for the purposes of section 21 (2)(b) of the Financial Services and Markets Act 2000 by J.P. Morgan plc of 125 London Wall, London ECY 5AJ and Morgan Stanley & Co. International Limited of 25 Cabot Square, Canary Wharf, London E14 4QA.
J.P. Morgan plc, J.P. Morgan Securities Ltd., Morgan Stanley & Co. International Limited and Morgan Stanley Securities Limited and their respective affiliates are acting for Virgin Mobile and Bluebottle Investments UK Limited and no one else in connection with the Global Offer and will not be responsible to any other person for providing the protections afforded to their respective clients or for providing advice in relation to the Global Offer. No offer or invitation to acquire shares of Virgin Mobile is being made by or in connection with this announcement. Any such offer will be made solely by means of listing particulars to be published in due course and any acquisition of shares should be made on the basis of the information contained in such listing particulars. The value of shares can go down as well as up. Past performance is not a guide to future performance. Potential investors should consult a professional adviser as to the suitability of any offering for the individual concerned.
The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the Securities Act) and may not be offered or sold in the United States (as defined in Regulation S under the Securities Act) absent registration or an exemption from registration, and any offering of securities to be made in the United States will be made by means of listing particulars that may be obtained from Virgin Mobile that will contain detailed information about Virgin Mobile and management, as well as financial statements. No public offering of the shares will be made in the United States.
This announcement does not constitute an offer to sell, exchange or transfer any securities of Virgin Mobile and is not soliciting an offer to purchase, exchange or transfer such securities in any jurisdiction where the offer, sale, exchange or transfer is not permitted or to any person or entity to whom it is unlawful to make that offer, sale, exchange or transfer. This announcement does not contain or constitute an offer of securities for sale in the United States. This announcement and the information contained herein are not for release, publication or distribution in, or into, the United States, Canada, Australia or Japan.
This announcement contains certain statements which are or may be deemed to be forward-looking statements. These forward-looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results to differ materially from those projected or implied in any forward-looking statements. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof and are not guarantees of future performance. Virgin Mobile disclaims any obligation to update any forward-looking statements contained herein, except as may be required pursuant to applicable law.
Stabilisation/FSA
Notes to editors:
About Virgin Mobile
Virgin Mobile is a major provider of mobile communications services within the UK, having acquired approximately 4.1m customers as at 31 May 2004. The company launched its operations as a mobile virtual network operator in November 1999. Since its inception, Virgin Mobile has achieved a number of significant milestones. Within a year of its launch it had over 500,000 customers, and by June 2001 over one million customers, making it the fastest growing major UK mobile communications provider to have achieved that milestone to date.
In the twelve months ended 31 March 2004, Virgin Mobile was the fastest-growing mobile communications provider in the UK, with approximately 1.3m net customer additions, representing approximately 26% share of net customer additions in the UK during this period (source: operators’ reported figures). As at 31 March 2004, 95% of its customer base consisted of pre-pay customers.
For the year ended 31 March 2004 Virgin Mobile generated turnover of £453.3m and EBITDA of £78.7m and an operating profit of £63.2m, all on a pro forma basis.
The company’s business model as an MVNO requires relatively low capital investment and generates high cash conversion. Virgin Mobile’s capital investment requirements are modest compared to those of the mobile network operators (MNOs) and generally the company pays for these services on a usage basis, thus freeing it from the significant capital investment required to build and maintain a network and deploy services.
The company had an 80 per cent return on capital employed for the year ended 31 December 2003 and accordingly the company believes it is positioned to achieve one of the highest returns on capital employed within the UK mobile communications services industry.
Virgin Mobile is majority owned by Sir Richard Branson's Virgin Group of companies and uses T-Mobile's network.
In the UK, Virgin Mobile phones are available direct on 0845 6000 600 or on the High Street at approximately 5,000 outlets including Virgin Mobile Specialist Stores, Virgin Megastores, Sainsbury, Tesco, Safeway, Asda, John Lewis, Littlewoods, Argos, The Link, Dixons, Carphone Warehouse, Curry's, Comet, Phones 4U, TOMO, Woolworths, Toys R Us and Rymans.
Virgin Mobile employs approximately 1,400 staff at three sites, Trowbridge, London and Daventry, and has an outsourced customer service centre operated by approximately 200 staff in Middlesbrough. It has been voted one of the top 50 places to work in Britain for two years running in an annual Financial Times survey.
Virgin Mobile’s customers are considered the most satisfied in the pre-pay sector according to the 2004 UK Customer Satisfaction survey by market researchers J.D. Power and Associates.
Benefits of the Business Model
- As Virgin Mobile is a mobile virtual network operator (providing a broad range of mobile communications services to its customers) the company has the ability to negotiate network agreements with one or more mobile network operators.
- As it utilises an MNO network, Virgin Mobile incurs relatively low capital expenditure in comparison to the other major mobile communications providers in the UK.
- The company markets its services and products under the Virgin Mobile brand, which benefits from the strength of the Virgin brand. According to HPI Research commissioned by Virgin as at 10 December 2003, Virgin was the fifth most admired brand in the UK.
- ARPU for the twelve months ended 31 March 2004 was £147 on an unaudited pro forma basis, one of the highest pre-pay ARPUs in the industry. Further details about the information required to determine the unedited pro forma figure will be included in the listing particulars expected to be published on 21 July 2004.
- In the twelve months ended 31 March 2004 Virgin Mobile's level of churn was 14 per cent.
Competitive Strengths
- Differentiated approach to market, offering strong growth potential. Virgin Mobile believes it is well positioned to deliver strong growth rates in customer base, turnover and cashflow due to its philosophy of challenging market convention and focusing on customers, its strong brand positioning, its simple and compelling customer proposition, its design-led irreverent style, its broad distribution network and its strong management team.
- Business model that requires low capital investment and generates high cash conversion. Virgin Mobile is the only major mobile communications provider in the UK not to operate its own physical network. As the operator of a virtual network rather than a physical network, the company’s capital investment requirements are modest compared to those of the MNOs and it generally pays for these services on a usage basis, freeing it from the significant capital investment required to build and maintain a network and deploy services. As it is an MVNO and utilises an MNO network, the company’s modest capital investment model enables a majority of its cashflow from operating activities to be available to service finance, pay dividends or enable strategic investments.
- Strong brand. The Virgin Mobile brand is reflected in its entrepreneurial culture, its customer proposition and its differentiated approach to market. In particular, the company believes the Virgin Mobile brand has broad appeal with its target market of 16 to 34 year olds. Virgin Mobile believes its sustainable brand values resonate with its customers and provide a competitive advantage.
- Award-winning customer focus. Being attentive to the needs of Virgin Mobile’s customers as the consumers’ champion is at the heart of everything Virgin Mobile seeks to do. As a result of its emphasis on customer service, it consistently rates highly in customer satisfaction surveys and has won the Best Customer Service award from Mobile Choice magazine for each of the past three years. In May 2004 customers were the most satisfied pre-pay customers of any mobile communications provider in the UK, according to an independent study by researchers J.D. Power and Associates, which ranked Virgin Mobile as the “number one pre-pay mobile telephone service for customer satisfaction in the UK.”
- Strong management team with a proven track record. Virgin Mobile’s core management team has been in place since the company’s inception in 1999 and has significant experience in the mobile communications, branding and retail industries.
