Yesterday’s rumours that Ntl would be making a move for Virgin Mobile proved to be true with Ntl making an official offer worth £800m for Virgin Mobile.

If the deal goes ahead Ntl will use the Virgin brand to offer internet access, TV and fixed line and mobile telephony. Ntl said it had also held preliminary discussions with T-Mobile, Virgin Mobile’s network provider, which has said it supports any proposed deal.

No response has been made by Virgin Mobile and I have a sneaky feeling the initial offer of 323p per Share will be rejected. Early trading also seems to support this with Virgin Mobile shares rising to 337.25p in the first few minutes of trading today, suggesting that the City also believes a higher bid - or a rival bidder - is on the cards.

If the deal does goes through I think it will be a fantastic deal for both companies. Ntl will be able to give its products a fantastic new brand, will be able to offer new combined fixed/mobile products, will achieve marketing savings and will also have taken a key asset off the market by being a first-mover and ensuring that competitors like Sky won’t be able to utilise or acquire it.

Virgin Mobile will also benefit from it’s brand expansion and access to Ntl’s customers. Virgin Mobile’s userbase is predominantly young Pay-As-You-Go (PAYG) users and it has struggled to acquire older contract users. Linking up with Ntl and its more mature userbase should help to address this problem.

The deal will make Ntl/Virgin a more credible threat to Sky -in early trading Sky’s shares dropped 2.4% in London after the news.

“On a two- to three-year view, the enlarged (Virgin) group could pose more of a competitive threat to BSkyB,” noted analysts from Numis Securities.

“A…tie-up between Ntl and Virgin Mobile could be seen as strengthening the competitive pressures on BSkyB,” agreed Seymour Pierce analysts.

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