Outlook: Dialling the best story in town

THE market loves nothing better than a good story and just now one of the best stories in town in telecoms. Yesterday the Energis share price spurted 19 per cent just because it did something that it had promised to do at the time of its flotation last year.

Energis, which has hung its telecoms network on the National Grid system of pylon and wires, is to build local loops in London, Manchester and Birmingham giving it direct access to a business customer base worth perhaps pounds 3bn.

All right, there is bit more to the story than that. The vehicle for this expansion will be MetroHoldings, a joint venture between Energis, Deutsche Telekom and France Telecom. Thus, the Continentals end up bankrolling half the pounds 200m investment spend while Energis gets the chance to plug into Global One, their international link up with Sprint of the US. As an added bonus Energis gets to keep more of the margin from those lucrative investment banks customers by cutting out BT.

Over at Cable & Wireless Communications, they are also going for the corporate customer in a big way. CWC has discovered that there are better ways to spend money than digging up the streets and has decided to focus its efforts on building up the business base by updating the old Mercury network to handle much more data transmission. This area of the market is projected to grow at a compound rate of 30 per cent a year with the addition of more broadband capacity.

Bad luck if you happen to be one of the 1,500 souls whose jobs are surplus to requirements following the "optimum resourcing review". But never mind, CWC's redundancy packages are famously generous. In response to the news CWC's share price ticked up a more modest 2 per cent. Nevertheless, like Energis, it is also comfortably above the flotation price last year.

It is, of course, not just Energis and CWC that are roaring along. BT's shares have risen by a half in a year even though the company has done nothing except fail to land MCI. Colt is also going like a train.

The question investors will have to ask themselves at some point is whether they can afford to carry on believing everyone's story at the same time. Today's state-of the art kit is tomorrow's obsolescent technology. A better guide to the telecoms stocks is the quality of their management and their marketing. Right now that is conveniently being overlooked.

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