Market Report: Vodafone link gets good reception

TELECOMS were back in demand, inspired by a story that mobile phone group Vodafone was dialling up corporate action. Vodafone surged 39.5p to 778p in busy trading. At one time the shares touched 786p.

A link, perhaps even a full merger, with Airtouch, a US mobile phone group, captured the stock market's attention. The possibility that Vodafone could become involved with Airtouch has been given a number of whirls in recent months. With many observers taking the view that there could be considerable merit in a merger, the latest spin clearly enjoyed a good reception. Yesterday's rumour originated in the US where a merger is seen as a natural development. Vodafone is the larger of the two groups.

The telecom sector brushed off the Ionica disaster where administrative receivers were called in. The shares, suspended at 17.5p, were floated at around 390p only last year. BT rung a 19p gain to 770p as rumours that it may take full control of Cellnet resurfaced.

Colt Telecom rose 48p to 730p, with Lehman Brothers suggesting a 980p target; Energis gained 27.5p to 747.5p; Orange 13p to 553p and Securicor, owner of the Cellnet minority, 24.5p to 400p.

The rest of the market recaptured winning ways. Footsie advanced 64.6 points to 5,358.5 in moderate trading with New York's early strength and hopes of a half-a-point cut in interest rates next week providing just enough encouragement.

The water leakage following the Ofwat prices review was nowhere near as damaging as expected. Indeed Thames Water, after falling 55p, ended 30p higher at 1,085p. United Utilities closed 10p lower at 870p and Hyder, regarded as taking the harshest regulatory hit, 43.5p to 824.5p, a 12- month low.

The regulatory waves hit Railtrack, shunted 40p down to 1,620p. Besides the sight of Ofwat getting tough, the shares had to contend with warnings from their watchdog to the 24 train-operating companies. With Railtrack in the middle of a price review, the sudden regulatory strength unsettled the shares.

Rank, the leisure group, managed to throw off its inhibitions following the departure of chief executive Andrew Teare. The shares rose 13p to 239p on hopes that Ken Hanna, who executed the break up of Dalgety, could get involved.

Manchester Utd held at 213p despite the expected referral of the controversial BSkyB bid to the Monopolies and Mergers Commission, and Eurocamp dipped 2.5p to 193.5p following the pounds 6.9m sale of the bars and restaurants it inherited with the take over of Baldwins in August.

Enterprise Oil and Lasmo, its old sparring partner, were hit by Morgan Stanley adopting a more cautious stance. Lasmo fell 8p to 172p and Enterprise 4p to 415p. Little Emerald Energy, firmer at 8.75p, was said to be a bid target for Monument Oil & Gas, which is deeply involved in Emerald's Colombian drilling.

One oil bid that did materialise was a pounds 4.3m offer from Ramco for MMS Petroleum. The bid is 35p a share. MMS, which is accepting the offer, climbed 7.5p to 35.5p. Earlier Greenwich Resources made a share exchange offer, now worth about 28p share, which also had the management's backing. Ramco flared 37.5p to 370p.

Abbey National improved 12p to 1,148p with Warburg Dillon Read shooting for a 1,300p price. Most banks seemed content to mark time but Standard Chartered, up 35p to 645p, and Bank of Scotland, 28p to 623p, displayed relief on the Brazilian economic package.

CGU, the insurance group, gained 33.5p to 955p with Morgan Stanley setting a 1,080p expectation and Salomon Smith Barney going for 1,175p. Reuters was the best performing Footsie constituent, gaining 49.5p to 616; the shares were around 470p when the information group issued an upbeat trading message last week. Glass maker Pilkington, on results, rose 3p to 66.5p.

J Sainsbury, the superstores chain, remained on offer, falling a further 5.5p to 519.5p. But rival Asda, hit by downgradings on Wednesday, recovered 6p to 164p. Cassell, the publisher, rose 9.5p to 114p after saying it was in talks that could lead to a counter to the 100p offer from Macmillan Publishing.

An investment presentation helped Wassall, successful bidder for TLG, the lighting group, to a 10p gain to 185p. Powerscreen International, the hard-pressed engineer, rose 17p to 98p ahead of today's shareholders' meeting, and Finelist, the car accessories group, advanced 13.5p to 115p, following Albert E Sharp's support. Ellis & Everard, the chemical group, rose 22p to 205.5p on talk of a US bid.

Carlisle, the property group which is the new vehicle for Michael Ashcroft, started its AIM life at 15.5p with the warrants at 7.75p. The group has moved into recruitment and security and is looking for acquisitions. It will probably sell the properties it inherited from the old Carlisle shell.

SEAQ VOLUME: 758.5m

SEAQ TRADES: 53,220

GILT INDEX: 110.77 +0.61

AIM DEALINGS in the shares of Honeycombe Leisure, the Preston- based pubs chain, are due to start on Wednesday following the placing of nearly 5.5 million shares to raise pounds 3m.

The group abandoned an attempt to obtain a full listing last year after the market fell back. Since then Sandy Anderson, who made a fortune from the sale of the Porterbrook leasing company, has acquired control and become chairman.

THERE ARE stirrings at Motion Media, once an Ofex star, now resting at 85p. The group is selling its video telephones to more than 40 countries and, although behind schedule, its conference video system is being marketed by Philips.

The company lost pounds 1m last year and is likely to report another loss this year, but it could move into the black next year. The shares once approached 300p; they were floated at 67.5p.