Richard Branson in Shanghai on Monday. (Reuters)

London, Dec. 5 (Reuters): Cable firm NTL has made an ?817 million takeover approach to Virgin Mobile to create a TV, Internet, phone and mobile phone service provider under the Virgin brand.

Richard Branson, the billionaire entrepreneur who owns 72 per cent of Virgin Mobile through his Virgin Group, has told NTL that he would exchange his holdings for NTL shares, and maybe a small portion in cash, if the transaction proceeds, NTL said in a statement on Monday.

NTL said its offer valued each Virgin Mobile share at 323 pence in cash or 0.09298 shares of NTL.

A deal to buy Virgin Mobile would allow NTL 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 BT Group and satellite broadcaster BSkyB.

An industry source said the Virgin Mobile board might hold out for a better price, however, and Virgin Mobile shares were up 12.5 per cent at 350p, signalling investors are hopeful of a higher bid. NTL’s offer represents a 3.9 per cent premium to Virgin Mobile’s closing price on Friday.

BSkyB shares were down 2 per cent at 495p, the biggest fall on the benchmark FTSE-100, while BT shares were down 1.2 per cent at 211-3/4p.

“Strategically it is further evidence of convergence in the sector between telecom and media,” ING analyst Damien Chew said. Following BskyB’s recent purchase of broadband Internet firm Easynet, he said the deal would put most pressure on BT.

Analysts said there was a chance of a counter bid, with Vodafone Group and France Telecom’s Orange seen possibly as interested.

In considering its response, the Virgin Mobile board will be mindful of its duty to maximise value for all shareholders, the company said in a statement.

Analysts welcomed the deal, though some were concerned NTL already had its hands full integrating its recent acquisition of cable TV rival Telewest. “While we applaud the improved branding clout that Virgin would add to NTL we caution that NTL may be taking on too many things at once,” said Jim McCafferty at Seymour Pierce.

“Virgin Mobile does have customer-facing skills which the CATV (cable TV) companies lack. However, we question the quality of the Virgin Mobile customers which are typically low ARPU (average revenue per user) and may lack the income to buy other services.”

Virgin Mobile is the country’s fifth-largest mobile phone carrier. It does not own a network, instead rents capacity from Deutsche Telekom AG’s T-Mobile, which NTL has indicated that it is supportive of the proposed combination.

NTL is the second-largest UK pay-TV operator behind Sky and is the second-largest residential telephony provider behind BT. Both rivals are moving towards offering their own triple-play packages, leaving NTL in need of a way to set itself apart.

Many telephone customers are dropping their fixed-line service and relying solely on mobile phones.