Friday, 14 March 2008

Virgin Mobile USA lost £124 million

Virgin Mobile USA that was set up six years ago between Sir Richard Branson’s Virgin Group and Sprint (the US telecoms company) has lost $250 million (£124 million) after an 85% collapse in the company’s share price since its flotation last year. Poorer than expected fourth-quarter results caused the mobile phone operator’s share price to drop a further 41% yesterday to close at $2.46 (£1.23) in New York.

The initial public offering (IPO) for Virgin Mobile USA took place in October and Virgin Group reduced its holding from 42% to 37%.

The listing price was $15 (£7.50) a share and in early trading on the first day. However, the price has slid since then and the company now has a market capitalisation of only $130 million (£65 million). This has reduced the value of Sir Richard’s holding from $295 million (£140 million) to $48 million (£24 million).

The poor performance of Virgin Mobile USA is an embarrassment for the Virgin Group, which promotes itself as a private equity-style investor. After years of treating stock markets with suspicion, Sir Richard’s asset managers have looked at a number of possible IPOs to release value in the group’s divisions but the rapid drop in value within Virgin Mobile USA may encourage Virgin Group to keep companies private.

Service revenue rose 8% to $293.6 million (£148.28 million) and new customer additions were 958,000, down from 1.29 million after the company refused to cut prices in the run-up to Christmas.

Virgin Mobile USA has also come under increasing pressure from national carriers expanding into its pay-as-you-go space. The company expects revenue in 2008 will be flat and earnings to be between $105 million (£53 million) and $130 million (£65.6 million). These forecasts were also lower than Wall Street expectations. (source: Timesonline)

Michael (37) and Xochi (36) Birch made an estimated $600 million (£295 million) yesterday after the sale of their 70% stake in Bebo, the social networking site, to the AOL division of Time Warner for $850 million (£429.9 million) in cash. The Briton and his Californian wife set up Bebo – their sixth internet business – in 2005 and are not expected to remain with the company, which is the second most popular social networking site in the UK and the third globally after MySpace and Facebook.

No financial data regarding Bebo’s performance was released yesterday, although Randy Falco, chairman and chief executive of AOL, contrasted the price that Time Warner had paid with the $260 million (£125 million) that Microsoft paid for a 1.6% stake in the $15 billion (£7.5 billion)-rated Facebook. Bebo has 40 million users. Facebook is thought to have generated $100 million (£47 million) in revenues in 2007, which is likely to represent a benchmark for Bebo.

The plan is to develop Bebo internationally, with new sites around Europe, while at the same time trying to promote Bebo using AOL’s AIM instant messenger and ICQ chat technologies. (source: Timesonline)

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