Administrators called in as Ionica rescue talks fail

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The Independent Online
IONICA, the wireless telephone company that was floated on the stock market just 15 months ago, called in the administrators yesterday in what ranks as one of the most remarkable corporate collapses of recent times.

The decision to appoint administrators followed the sudden failure of negotiations on a rescue deal with two strategic investors, the telecoms equipment company Nortel and the rival wireless telephone operator Atlantic Telecom.

The collapse of the talks leaves 1,000 jobs at the Cambridge-based company hanging in the balance and will cause huge uncertainty for its 60,000 customers.

Last night as the administrators, PriceWaterHouseCoopers and Ernst & Young moved in, there were fears that as many as two-thirds of Ionica's workforce might lose their jobs.

Only last Friday, the Ionica chairman Tony Coleman told shareholders at the annual meeting he was confident of announcing a successful deal with unnamed strategic investors before the end of this year.

However, in its statement late yesterday afternoon, the company said it was "unlikely that any transaction on terms acceptable to Ionica shareholders can be concluded before Ionica's cash reserves are exhausted".

The shares were floated by SBC Warburg Dillon Read in July 1997 at 390p, valuing the group at pounds 659m. They subsequently fell as low as 8.5p and were suspended earlier this week at 17.5p, valuing the company at pounds 29.5m.

Ionica is thought to have had about pounds 35m left from the pounds 590m it has raised in debt and equity since 1993 - enough to keep the business going until January of next year.

The company said last night that it intended to distribute its net assets - thought to amount to about 30p a share - to shareholders although this could take considerable time.

Mr Coleman sought to reassure Ionica's subscribers saying: "We expect that a normal service will be provided to our customers while the administrators make their arrangements."

Customers would be informed in due course of the alternatives open to them, he added.

Ionica, which was the brainchild of former Imperial College scientist Nigel Playford, ran into trouble four months after its stock market debut when it warned that delivery of a key piece of software from its main supplier, Nortel, would be delayed.

This prevented it rolling out its nationwide network of base stations and enlisting customers as quickly as planned. Failure to meet its growth targets resulted in the banks refusing to advance further finance.

By the end of this year it was due to have signed up 195,000 subscribers and cover a third of the country but by the end of September it only had 60,429 customers and coverage of one household in eight.

Earlier this year Ionica abandoned plans to further extend the network and moved Mr Playford sideways to the post of deputy chairman, bringing in a new chief executive, Michael Biden.

Last night it was unclear what had caused Nortel and Atlantic to pull out of talks although one source suggested that they were insisting on a refinancing deal that would have valued Ionica shares at as little as 10p.

"Nortel also blew hot and cold and that became unsettling for the company," added one source close to Ionica.

Countdown to disaster

t 18 July 1997: Ionica floats at 390p. The shares jump to 430p on the first day of trading.

t 9 November 1997: The shares crash by 40 per cent after the company shocks investors with the news that a new software package has been delayed. Mike Biden joins from BT as chief operating officer.

t 29 January 1998: Mr Biden takes over as chief executive, and the founder, Nigel Playford, moves to deputy chairman. The finance director John Edwards resigns.

t 3 August 1998: Ionica announces that it has failed to find a strategic investor and has started talks to restructure its debt.

t 26 October 1998: Ionica shares are suspended amid hopes that a rescue deal is imminent.

t 29 October 1998: The company appoints administrators after the collapse of the rescue talks.

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