Shares slide as CMG and Logica lose out on text-messaging contract

Shares in the IT services companies CMG and Logica took a battering yesterday after a lucrative contract to supply next-generation text-messaging software to Vodafone went to Ericsson instead.

Logica shares fell 6 per cent to 604p, making it the biggest faller in the FTSE 100 index, while shares in the rival Anglo-Dutch company CMG also dropped 6 per cent to 234p.

Analysts were dismayed that neither CMG nor Logica, which both currently supply texting software to Vodafone, had been selected to deliver the latest technology. Both companies had been bidding for the deal.

One industry source said, however, only CMG, Nokia and Ericsson had made it through to the final stages of the bidding process with Vodafone while Logica was eliminated earlier.

While no financial details of the deal with Ericsson were available, industry sources said the Swedish mobile phone maker was expecting revenues of about $15m (£10m) this year.

The multimedia messaging service is not expected to really take off until a wider choice of handsets become available later this year and into 2003.

So-called MMS is an extension of the current text-messaging systems on mobile phones and will allow users to send and receive messages that include pictures and video clips rather than just plain text.

Vodafone, which plans to introduce its MMS service from the middle of this year, will initially offer it to customers in nine European countries including the UK.

The mobile phone giant said it thought some of the most popular uses of the service might be sending birthday cards, picture postcards, cartoons, presentations and share price graphs.

The service will operate over existing 2.5G, or so-called GPRS, mobile phone networks as well as the upcoming third-generation networks which are still being built.

Users will, however, need one of the latest mobile phones to use the new service like Ericsson's popular colour-screen T68 model or the yet-to-be-launched Nokia 7650 model which also contains a minute digital camera.

A Logica spokesman, however, tried to play down the loss, saying: "I think this is going to be good for the messaging industry as a whole and will stimulate demand for services."