Logica in £265m telecoms sale

LogicaCMG sold its telecoms business for £265m yesterday, bringing an end to its rollercoaster ride in the mobile phone messaging market.

It has sold the division to Atlantic Bridge Ventures for about £100m more than analysts had pencilled in. LogicaCMG will use the proceeds to pay down debt, buy out some minority shareholders at its recently acquired businesses in Sweden and Portugal and to launch a £130m share buy-back programme. Shares in the IT services company leapt 5.5 per cent to 182p.

Brian Long, a partner at Atlantic Bridge Ventures, said that the unit has a 60 per cent market share in text messaging and a good range of products in new growth areas like picture messaging, video messaging and payment products.

Logica bought its wireless messaging business in 1997. It proved a timely move prior to an unexpected boom in texting among European mobile-phone users and Logica benefited from extraordinary growth in the sector.

Yet its success in the late 1990s soon became a thorn in its side despite the merger of Logica and CMG's messaging products. A reduction in spending by mobile operators after the collapse of the tech boom combined with Logica's failure to win a significant share of systems for new types of messaging services and put significant pressure on the company. Analysts called on LogicaCMG to close the unit or give it away so that it could focus on its IT services progress.

Instead the company cut costs at the unit and sharpened up its product line. Seamus Keating, LogicaCMG's finance director, said the company could have sold the unit earlier but chose to get the business back on track first. He said that the high-profile business had added volatility to the company's financial progress but that its patience had paid off.

"Now is the right time to sell, given our expansion into IT services. It is an indication of the changing shape of our business," he said.