Mobile phone hang-up hits operators’ shares
Last week, the fly landed in the ointment for telecoms stocks when comments ascribed to Kurt Hellstrom, the boss of Swedish mobile phone giant Ericsson, caused significant damage to share prices of many companies in the sector.
Hellstrom was reported to have said that mobile phone operators are likely to experience some difficulty as a result of the high prices they have paid for European third-generation licences. The FTSE 100, the UK index of leading stocks, saw red as prominent heavyweight stocks such as Vodafone AirTouch, Colt telecom, Cable & Wireless and Marconi took a serious beating late last week. Cable & Wireless recovered some lost ground on Friday. BT’s share price also came under a lot of pressure.
Increasingly, market analysts are worried that many mobile phone companies will resort to increasing their debt in order to foot the bill for the new licences. Some also fear that liquidity problems could arise. Besides, there are worries too that vital new network projects could be starved of funds and that increased costs could then be pushed on to customers.
Railtrack rallies at news of network investment
However, amidst the declining share prices, there was a little glimmer of hope for the FTSE. The index drew some comfort from Railtrack group, the rail operator, which saw its share price race ahead on Thursday. The sharp rise was attributed to unconfirmed reports that the Government is planning to develop parts of the rail network to cut freight on roads. There was speculation that the Government would soon announce a plan to spend billions on the rail project. Railtrack’s share price has endured some ups and downs but it is still a long way short of its best this year.
Pearson acquisition heralds US diversification
Pearson, the UK international media group, announced that it has acquired a controlling stake in Family Education Network (FEN), which is based in Boston in the US. The deal, which cost Pearson about $130m, will enable it to diversify into programming, network technology and content development and Pearson’s digital publishing arm Headland Digital Media will be admitted to the network. America Online (AOL) is a minority shareholder in FEN.
M&Sclaims victory in first round of contract court battle
Ailing retail group Marks & Spencer claimed last week that it has won the first round of the court battle launched by William Baird Textile Holdings, the supplier of clothing to M&S whose contract was terminated after three decades.
William Baird wants substantial compensation for abrupt termination of its contract and the resulting damage to the company’s goodwill. M&S’s share price is still under immense pressure and the overwhelming view in the markets is that the company’s management is weak.