Ionica awarded third public phone licence

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THE Government has licensed the Cambridge-based company Ionica to be the third public telephone operator, competing directly with BT and Mercury.

Ionica said it would invest hundreds of millions of pounds in developing its network and intended to take at least 5 per cent of the residential market within 10 years.

The government has also started work on six further licences which are available for public consultation. They are for Vodafone, Scottish Hydro-Electric, Telecom Electric (owned by the National Grid), Scottish Power, Millicom of the US and City of London Telecommunications.

A spokesman for the Department of Trade and Industry said: 'This is the first break with the BT/Mercury duopoly.'

Ionica's backers include 3i, Robert Fleming Investment Trust, Ivory & Sime and Yorkshire Electricity. Kingston Communications, Hull's private telephone company, is also a partner in the venture, and yesterday Northern Electric said it had paid pounds 3.3m for a minority stake. Ionica will use a new radio-based technology to avoid the cost of laying cables.

Nigel Playford, Ionica's managing director, said: 'This will give the ordinary domestic customer better prices and better facilities. This is a service for everybody. Ionica will undercut BT across the board.'

He said that the service should be launched towards the end of next year and would be profitable within three years.

Mr Playford added that Ionica's radio system had already been licensed in one country outside the UK.

Vodafone's new licence, if approved, will allow it to offer fixed as well as mobile telephone services and some international communications.

Scottish Power, Scottish Hydro and the National Grid plan to exploit their existing electricity networks and the related land to run their telecommunications services. Telecom Electric, the National Grid Company subsidiary, will wrap telephone cables around its overhead power lines.

Millicom said it would provide a wide range of telecommunications services to residential and business customers, but City of London Telecommunications will concentrate on businesses in the capital.

Analysts believe that, while the licences are interesting, they will have little impact on BT and Mercury. One analyst said that it would be a long time before even ambitious companies such as Ionica began to make serious inroads into the market.