Sir Richard Branson was last night considering whether to alter the terms of Virgin Mobile's stock market flotation after institutional investors indicated that they were not prepared to endorse his valuation of the company.

A source close to the company, the fifth biggest operator in Britain, said the billionaire was prepared to pull the deal on Friday night but was persuaded by his advisers to consider either reducing the size of the issue or lowering the price.

Sir Richard's Virgin Group was planning to issue 98m Virgin Mobile shares, around 40% of the company, at a price of between 235p and 285p. Including £300m of debt, that would have valued the business at just over £1bn and seen the colourful entrepreneur pocket up to £279m.

Sir Richard, who has an uneasy relationship with the City, needs to gain a stock market listing for Virgin Mobile if he is to push ahead with the flotation of his much larger Virgin Mobile USA business.

"If he [Sir Richard] takes a lower price now, he will get the company into the public domain, investors will get used to the business model and he will get the float of Virgin USA away," the source said.

It is thought that Sir Richard will need to float the American operation in a couple of years when an agreement with its US partner, network operator Sprint, comes to an end.

Virgin Mobile, and its advisers JP Morgan Investec Securities and Morgan Stanley, have spent the last week and a half attempting to convince potential investors on both sides of the Atlantic that the company is worth more than its traditional rivals like Vodafone.

However, their efforts appeared to have been unsuccessful with Virgin Mobile shares trading on Friday in the unofficial grey market at between 230p to 241p.

Assuming Sir Richard does not abandon the flotation, the issue will be priced tomorrow night and conditional trading in Virgin Mobile shares will begin the following morning.

"One man is making this decision. We think lowering the price would be a good move and he is thinking about it. The arguments have been made," the source said.

As a virtual network operator - the company leases its network capacity from T-Mobile - Virgin Mobile requires little capital expenditure and is highly cash generative.

Separately, there were doubts last night over the flotation of Premier Foods, the maker of Branston Pickle and Typhoo Tea.

The company, which is owed by US private equity group Hicks, Muse, Tate & Furst, is expected to list on Tuesday with a valuation of about £600m.

However, fears were mounting yesterday that if the company could not sell its shares within the indicative price range of 230p-260p it would postpone the float.



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