First Telecom abandons float in favour of Atlantic bid

Atlantic Telecom, the fixed wireless network operator based in Scotland, yesterday unveiled a £478m all-share buyout of First Telecom, a privately owned UK-based fixed wireless player which is building operations in Germany.

First Telecom co-founder Mark Daeche, 36, will pocket over £50m in Atlantic stock. Its 600 employees will share around £55m in Atlantic stock.

Separately, Atlantic swapped UK bandwidth capacity with Metromedia Fiber Network for dark fibre optic access in 16 European cities. It also agreed a partnership with AboveNet.

Graham Duncan, chief chief of Atlantic, said: "These transactions will give us the opportunity to be a leading broadband telecommunications provider in Europe, offering our joint customer base a combination of the best of fibre, fixed wireless and digital subscriber line technologies. The strategies of First Telecom and Atlantic Telecom are very similar and the combination of the two groups is compelling, giving an enlarged Atlantic Telecom scale in the UK and an important early entry to symetric digital subscriber line deployment in Germany, Europe's largest telecom market."

The dilutive impact on Atlantic saw its stock slump 64p or 8.4 per cent, valuing the company at £1.05bn. First Telecom shareholders will emerge with about 29 per cent of the enlarged group, which will have a value of over £1.5bn.

First Telecom had been planning a flotation to raise capital for expansion. But the market downturn in telecoms and technology stocks in recent weeks has seen initial public offerings tail off.

The company has targeted Germany for selling DSL services to business owing to the slow speed of the technology's roll-out in Britain. First Telecom said that Britain was several years behind since British Telecom is not required to allow rivals access to its local lines until mid-2001.

Both companies specialise in providing voice and data services to small and medium-sized businesses using low-cost radio transmission systems. Atlantic operates fixed wireless services in Glasgow, Edinburgh, Aberdeen and Dundee. It plans to launch services in Manchester in July.

First Telecom offers voice and internet service provision products to 5,500 companies and 135,000 residential pre-paid customers. It aims to launch SDSL services in Germany from July.