C&W rumours set the phone lines ringing

Market Report

CABLE & WIRELESS sent dealers scrambling for the phone yesterday on talk of corporate action and the sale of its One2One mobile phone business.

The telecom group rang up a 39.5p rise to 815p as buyers moved in. It was one of the star performers in a day when the FTSE 100 posted a three- figure gain on the back of positive US influences.

Demand for C&W was sparked by rumours that it is lining up a merger with deal-hungry France Telecom.

The Paris-based giant has been left out in the cold by the tie-up between Deutsche Telekom and Telecom Italia. The German-Italian alliance will probably see the demise of Global One, the global grouping of Deutsche, France Telecom and Sprint of the US.

With its main partner gone, the spurned French Telecom needs a deal quickly and C&W could be an attractive option. The French are keen to expand in China and Hong Kong, where the UK group has had a presence for some time, while Graham Wallace, C&W's recently-appointed chief executive, would like to expand in Europe.

The merger speculation was compounded by whispers that C&W is close to finding a buyer for One2One. The company and his US partner MediaOne have pledged to float or sell the UK's fourth-largest mobile phone operator and price tags range from pounds 8bn to pounds 11bn. The market believes that C&W has opted for a sale, and Deutsche, Mannesmann, the German media giant, or even a US company are touted as possible buyers.

The FTSE 100 was back on the winning trail, soaring 102.6 to 6,413.6, boosted by an inspired Wall Street. The Dow Jones was in buoyant form following Wednesday's all-time high with a strong opening.

London's undercard was also in good nick, with the FTSE 250 closing 28.9 up at 5,792.3 and the Small Cap surging 22.8 higher to 2,508.3 - its highest in 1999.

C&W was not the only telecom high-flyer. Vodafone buzzed 60p higher to 1,135p as fund managers rushed to increase their weightings ahead of the completion of the multi-billion pound takeover of its American rival Airtouch. The US company's positive first-quarter results helped.

The cable operators were excited by merger talk. The US group NTL, the third-biggest operator in Britain, has just ditched Newcastle United Football Club and hinted at a deal with Telewest Communications, the UK's second- largest cable group, who is in talks with the market leader Cable & Wireless Communications.

The prospect of a three-way merger beamed the cable companies higher, with CWC moving 16p up to 691p, and Telewest rising 6.5p to 262p.

Colt Telecom, up 54p to 1,138p and the co-owner of Cellnet Securicor, 21.5p higher at 570p, followed the pack.

The old chestnut of a pounds 4.7bn bid by Unilever for the Lemsip-maker Reckitt & Colman blossomed again.

The prospect of an offer north of 1,000p for Reckitt whetted dealers' appetites. Reckitt flew 32p up to 720p, while Unilever, the producer of Persil, washed 18p higher to 575.5p. Some positive comments by its US rival Colgate on the Latin American market were also well-received.

WPP Group claimed the top spot amid blue-chip risers. The advertising agency jumped 34p to 546.5p after Goldman Sachs said the improving global economy will boost next week's first quarter results.

Abbey National netted a 85p rise to 1,368p after a bullish AGM statement. The business support group Hays was not far off, closing 41.5p higher at 687.5p as buyers focused on its tightly-held stock.

Marks & Spencer was on sale, falling 20.75p to 440.25p as Warren Buffett failed to materialise on its share register.

ICI slipped 25p to 649.5p after the angry chairman Sir Ronald Hampel lambasted analysts and shareholders while reporting a 44 per cent slump in first-quarter profits.

Amid the mid-cappers, the healthcare group Nycomed Amersham surged 26.25p higher to 515p. It hopes to join the FTSE 100 next week if the merger between GRE and Sun Life & Provincial is completed. Sector analysts are having a look at its US operations.

The engineers continued their resurrection. Tomkins, the buns-to-guns conglomerate, shot 20.5p higher to 290.5p, while Charter, the rail tracks producer, travelled 23.5p upwards to 445p.

Bid rumours were rife. The pump-maker Weir sloshed 9.5p higher to 277.5p on new rumours of a US bid. Jardine Lloyd Thompson, an insurance broker, firmed 9p to 235p on vague talk of an overseas takeover offer.

Shanks & McEwan, the waste disposal group, rose 5p to 229 on recycled rumours of a takeover by the water company Severn Trent. The housemaker Wilson Bowden built a 29p advance to 779p on its inclusion in Dresdner Kleinwort Benson's "Euro-Bubble" list. The portfolio, which promises low- risk investment in UK cyclicals, includes, among others, Capital Radio, up 31p to 803, and Kingfisher, 38p up to 809.5p.

JJB Sports was out of breath, losing 57.5p to 372.5p, after reporting a slump in sales. The sports retailer's own goal depressed Black Leisure, down 14.5 to 234.5p, and John David Sport, down 4.5p to 139p.

The minnows had a lively session. Densitron, an electrical equipment maker, sparked 9p higher to 32p after announcing the sale of its microwave division. The deal should treble its pounds 4m market value.

The merchandising specialist Princedale soared 2.75p to 10.5p after returning to profit. The drug group Alizyme surged 7.5p to 37.5p on confirmation of trials for its obesity drug. French, a textile group, closed 7p up to 41.5p on bid talk. Julian Richer, chairman of the hi-fi group Richer Sounds, has built up a 14.15 per cent stake.

Cala, a Scottish builder, soared 31p to 184.5p after the privately-owned rival Miller launched a 175p-a-share bid, which could be trumped by the management. Fellow builder Henry Boot jumped 30p to 225p on speculation that an offer is near.

SEAQ VOLUME: 1.2bn

SEAQ TRADES: 82,050

GILTS: 111.09 -0.47

ML LABORATORIES, a high-flying biotechnology group, rose 13p to 182.5p yesterday.

There is some talk that it is close to clinching a deal with the US firm Merck, the world's largest pharmaceutical company. The agreement is likely to involve a licensing agreement for one of the special inhalers developed by ML. The shares are hovering near their 12-month peak of 197.5p, but are still well below the 468.75p reached three years ago.

BIRSE GROUP, a small construction group, is at the centre of a flurry of speculation.

Rumour has it that the Humberside-based builder is soon to be awarded a large contract. But there is also some talk that the slump in the shares from 30p in 1995 to yesterday's 7.5p might attract a predator. Insiders believe any bid will have to be well into double figures to convince the chairman and chief executive Peter Birse to sell its 20 per cent stake.