Virgin Mobile, the mobile arm of UK telecoms company Virgin Group, could drop plans to launch a £1.2bn (€1.8bn) initial public offering in favour of raising debt because a flotation could prove too expensive.

JP Morgan, Morgan Stanley and Investec were appointed this week to advise on raising capital in the equity markets through an IPO, but the company is now understood to be concerned about a requirement to pay £100m to Deutsche Telekom if it floats, according to sources close to Virgin Mobile.