Market Report: More bad news from France knocks BT down

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The Independent Online

If the French telecoms market offers any clues as to the future for BT Group, then investors in the UK phone giant were right to sell the stock down 5.5p to 210.25p yesterday. The widely held share was the worst performer in the FTSE 100.

Hot on the heels of a profits warning from France Telecom last week, when the former monopoly predicted up to 40 per cent of its fixed-line customers would have switched to cheap internet-based phone calls by the end of 2006, there was another worrying development yesterday. The French telecoms regulator said that "local loop unbundling" - where rival telecoms service providers take over the phone lines into customers' homes from France Telecom - was proceeding at a fast pace.

There were 592,000 unbundled lines in France at the end of 2005, compared with 95,190 a year earlier, and the number of customers terminating their fixed-line contracts with France Telecom rose by 64 per cent last year.

Local loop unbundling in the UK has not reached French levels but analysts are already alive to the twin threats of internet-based phone calls and cheaper unbundled services from smaller rivals. "I would be surprised if BT could escape without a pretty large profit warning of its own this year, or soon thereafter," said one.

BT was the worst hit, but the whole of the telecoms sector was in the doghouse yesterday. There are growing fears that the next set of performance figures from Vodafone will be disappointing, with competition in mobile telephony starting to look as vicious as that in fixed-line services. Vodafone shares were down 2p to 124p. Other telecoms shares to fall included Cable & Wireless, off 2.5p at 120.5p, and Colt Telecom, 0.25p lower at 55.5p. Virgin Mobile, though, was up above the mooted level of NTL's latest offer. With the stock rising 5p to 373p, gossips reckoned the Virgin Mobile board would squeeze a penny or two more from NTL and Richard Branson for the minority shareholders beyond the 372p laid on the table last Friday.

The FTSE 100 succumbed to a little profit-taking after Wall Street's traders got back from their long weekend. Since they were last at their desks, the oil price has spiked higher, raising fears it could trigger an economic slowdown, and the geopolitical situation, particularly surrounding Iran, has grown more alarming. The UK's main index ended the day at 5,699.0, down 41.2 points.

PartyGaming bucked the trend, the best performer for the second session in a row. The online poker company, whose flotation divided the City, was up a further 4.75p to 154p, almost a third above its July float price. Anecdotal evidence is that customers have whiled away the winter nights with some serious gambling. Investors have also been able to tell a lot from the smile on the face of John Anderson, the chief executive of 888.com, which counts poker among the games on its gambling sites. He won't have been giving any guidance on how well the company is trading - that is for a formal Stock Exchange news release - but his sunny disposition in meetings with institutions in recent days led to a 5.5p win for the company's share price yesterday. It now sits at 223p, a 27 per cent premium to its September float price. NETeller, which runs an "e-wallet" for transfers between punters and online poker sites, was up 15.5p to 856.5p.

Investors were positioning themselves for a return of cash from InterContinental Hotels, which sold its stake in the soft drinks firm Britvic for £371m last month. Together with a big programme of asset sales (the company would prefer just to manage hotels, not own them), brokers are predicting a £1bn cash pile will be divvied out among shareholders. The stock rose 7p to 836p. Britvic, by the way, has performed well and yesterday hit a new high of 255.5p, up 5.5p on the day and 25.5p above its offer price.

There was also chatter among the lower tier of the financial services sector, with Close Brothers shares falling 15.5p to 960p after UBS raised fears of rising bad debts in the banking division. And Arbuthnot Banking, the owner of a mini-investment bank, was up 15p to 507.5p on the belief that income from corporate deal-doing and market making is up 40 per cent on a year ago, thanks to the boom in merger and acquisition activity.

Finally, doomsayers who think the mania for oil or mining stocks will end in tears have another stock to add to their list of told-you-so's: Indago Petroleum. The company, which is exploring for oil in Oman and the United Arab Emirates and is chaired by the former Conservative energy minister Tim Eggar, followed up its "To start trading on AIM" statement of 2 December with a "To plug and abandon dry well" statement. The shares, floated at 70p, dived 15p to 58.5p.

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