The Week In Review: Telecoms are on line for a fresh upturn

Imagine a portable phone that acts as a mobile phone when you are out-and-about but connects with the cheaper fixed-line networks, albeit without the need for wires and cables, when you are inside making calls from home or the office

Imagine a portable phone that acts as a mobile phone when you are out-and-about but connects with the cheaper fixed-line networks, albeit without the need for wires and cables, when you are inside making calls from home or the office.

This convergence of mobile and fixed-line networks is exactly the sort of technological development that many investors are predicting will dominate the sector this year. The other is the outcome of various regulatory developments and BT Group, so long the lame duck of the sector, stands to benefit from both.

Having had a good run from a low of 169p early last summer, BT shares have risen to finish at 207p yesterday. However, on a forward price earnings multiple of just 11 for the year to end March 2006, the stock is still cheap compared with its big European rivals.

But BT is not simply a valuation play. It has hitched its wagon to the concept of mobile and fixed-line convergence and will roll out a product, called Bluephone, later this year. Rather than being a pure mobile play like many of its rivals, BT is an integrated business and fixed-mobile convergence could give renewed relevance to its dominant but always vulnerable looking position in the UK fixed line market.

That continues to come under attack. But other technological developments, such as the increased uptake of broadband internet connections, will also play into its hands.

From a regulatory point of view, Ofcom has laid down a new regime governing how BT Retail and BT Wholesale do business with each other to try and ensure fairness for rival retail operators who also have to deal with BT Wholesale. While the regulator has not insisted BT should be broken up, it seems inevitable this will happen in 5-10 years time. These behavioural remedies are a first step in that direction and the greater disclosure required under the new regime will result in a better managed BT and the realisation of more shareholder value.

As for the sector's other behemoth, Vodafone, it is focused on third generation (3G) services and making sense of the jigsaw of acquisitions around the world that Sir Christopher Gent masterminded. Like its rival mm0 2, both are locked in an increasingly punishing battle at home as tariffs become ever more competitive.

Perhaps the dark horse for this year will be Cable & Wireless. After fearing the worst for its UK business, the market breathed a collective sigh of relief in November that results were in line with expectations. It has even started a share buyback programme and has plenty of cash. As a punt C&W could be a winner.

SAGE

It is five years since businesses large and small were on their Millennial spending spree. It is worth betting now that spending will recover this year, and worth investors venturing back into the decimated software and computer services sector.

Sage sells vital software to a client base of almost 4 million small businesses. It is as dull as tech gets, but lucrative and the company has squeezed out profit growth every year. US trading ought to improve this year, so the shares will put in a good performance.

LOGICA CMG

Investors ought to look for companies able to offer more complicated systems integration services (such as Morse), which can operate a very low-cost business model (such as Asia-based Xansa).

And although there are nerves surrounding the 2004 figures, which are due to be published soon from LogicaCMG, the UK's biggest services company, its position in the public sector will act as a bulwark while it awaits an upturn in private sector work in continental Europe. Its shares are worth a buy.

ARM HOLDINGS

In IT hardware, the semiconductor cycle - the ebb and flow of demand for microchips - appears to have peaked, barely months after investors realised it was on the up. That leaves the companies sitting on precarious stock market valuations, and ARM Holdings, in particular, is at high risk of disappointing.

MARCONI/SPIRENT

The real stars could be the dogs of the previous five years, the telecoms equipment makers. An industry plagued by over-capacity ought to get back into balance as telecoms companies begin to spend on networks. Buy Marconi, buy Spirent.

Worth digging in with the miners

One of the more surprising stock market results of last year was that, despite the surge in commodities prices, mining shares actually performed less well than the market as a whole. But neither economic growth nor the Chinese industrial revolution are at an end. Projections for supply and demand this year suggest that commodities prices will remain strong.

Meanwhile, the mining giants continue their expansion but this entails big projects that will take until the end of the decade to come to fruition. Mining shares look decent value if you take a long view.

Our favourite of the FTSE 350 miners is the Chile-focused Antofagasta on the basis that, in a consolidating sector, the expanding copper specialist could become a takeover target, especially now its 65 per cent shareholder has stepped back from the chairmanship.

The biggest, most diversified miners are Anglo American, BHP Billiton and Rio Tinto, the latter offering probably the best mix of assets at a relatively lowly share price. Anglo American risks underperforming this year, if a consumer slowdown takes the lustre off precious metals prices.

And what of the minnows? Investors will succeed who can tune out the stock market whispers to concentrate on the real value enhancing moments for speculative mining ventures. These include the proving up of reserves, partnership deals with bigger industry players, and the results of a feasibility study of production.

A few ideas. Asia Energy, which is sitting on 430 million tonnes of coal in Bangladesh, is one of the riskiest and potentially most rewarding investments. We also like European Nickel, where confidence is rising that it will be able to start production in Turkey. Frontier Mining has one of the world's cheapest- to-run gold mines in Kazakhstan. And a recent float, Uruguay Mineral Exploration, ought to be able to fund its racier ventures with the stable cash flows from its first goldmine.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want it for the fitness tech, or for the style
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

    Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

    £50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

    Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

    £13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

    Ashdown Group: Training Programme Manager - City, London

    £40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

    Day In a Page

    Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

    Armenian genocide and the 'good Turks'

    To continue to deny the truth of this mass human cruelty is close to a criminal lie
    Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

    'Lou needed care, but what he got was ECT'

    The truth about the singer's upbringing beyond
    Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

    This human tragedy has been brewing for years

    EU states can't say they were not warned
    Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

    Women's sportswear

    From tackling a marathon to a jog in the park, the right kit can help
    Hillary Clinton's outfits will be as important as her policies in her presidential bid

    Clinton's clothes

    Like it or not, her outfits will be as important as her policies
    NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

    Who's monitoring the outsourced NHS services?

    A report finds that private firms are not being properly assessed for their quality of care
    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

    The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
    How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

    How do Greeks feel about Syriza?

    Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
    From Iraq to Libya and Syria: The wars that come back to haunt us

    The wars that come back to haunt us

    David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
    Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

    Too busy to surf? Head to The Pool

    A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
    Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

    UK's Major Tum to blast off on a spice odyssey

    Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
    John Harrison's 'longitude' clock sets new record - 300 years on

    ‘Longitude’ clock sets new record - 300 years on

    Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
    Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

    Let the propaganda wars begin - again

    'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
    Why Japan's incredible long-distance runners will never win the London Marathon

    Japan's incredible long-distance runners

    Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
    Why does Tom Drury remain the greatest writer you've never heard of?

    Tom Drury: The quiet American

    His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace