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Last Updated:  Monday, 10 March, 2003, 15:23 GMT
'Tug-of-love' over Virgin Mobile
Sir Richard Branson
Sir Richard is unhappy with the agreement
Virgin Mobile is at the centre of a bitter ownership battle between Sir Richard Branson's Virgin group and its German partner T-Mobile.

Virgin Group has filed a High Court action against the German company, which is owned by Deutshce Telecom, in a bid to buy out its 50% stake in the "virtual" network.

The two companies have recently clashed over the terms of their agreement, which dates back to 1999.

Virgin Mobile relies on T-Mobile to provide service for its 2.4 million mobile customers as it does not own any masts or infrastructure itself.

Court clash

But T-Mobile bosses in the UK feel they are getting a raw deal from the arrangement.

It is like a marriage that is slowly falling apart - the only argument now is what happens to the child
Industry source
Last week, the High Court found in favour of Virgin after it clashed with T-Mobile over payments made to Virgin for incoming calls to Virgin Mobile users.

T-Mobile wanted to cut the payments, thought to be worth 4.56 a month per customer.

When Virgin refused, T-Mobile tried to break up the partnership by activating a "no-fault" termination clause.

Virgin 'pleased'

But the judge ruled in favour of Virgin, claiming the action was an attempt by T-Mobile to gain commercial advantage.

Sources close to the case claim T-Mobile was attempting to wrest ownership of Virgin Mobile from its partner or trigger a bidding war for the company, which some analysts have valued at 1bn.

Virgin said it was "pleased" with the outcome of the court action.

It has now filed a follow-up claim in the High Court citing "material breaches" of its shareholder agreements with T-Mobile, claiming it is unhappy with certain aspects of the arrangement.

'Marriage break-up'

If succesful, the action could force T-Mobile to sell its shares in Virgin Mobile to Virgin.

The price would be determined by a formula contained in the original joint venture agreement.

One source close to the deal said: "It is like a marriage that is slowly falling apart.

"The only argument now is what happens to the child."

New deal?

Virgin Mobile moved into profit for the first time last year, on sales of 290m.

Buying out T-Mobile's share of the business would not directly affect Virgin Mobile customers, as the company would continue to use the German company's network.

But it would open the way to Virgin to negotiate a deal with another UK mobile operator at some point in the future.

Both sides are refusing to comment on the case.

Virgin Mobile reports strong sales
23 Jan 03 |  Business
Record loss for Deutsche Telekom
10 Mar 03 |  Business

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