Outlook: One2One

FEEL LIKE an Ein Zwei Ein with Britain's number four mobile phone operator? Or what about an Un Deux Un? Confirmation that One2One has been put on the block by its joint owners, Cable & Wireless and MediaOne, has got the telephones ringing red hot all around Europe as well as in the US of A. Deutsche Telekom and France Telecom will just have to be patient, along with Bell Atlantic, and wait for a connection.

Forget for the moment the awkward fact that One2One has never made a profit, or that it is saddled with pounds 1.7bn of debt, or that it is the smallest player with a poor record of service quality operating in a viciously competitive market. This is the world of cellular, where every figure is as long as a telephone number, especially the valuations.

The most extreme of these puts a price tag of pounds 11bn on One2One, based on subscriber numbers doubling in the next year and six in 10 homes owning a mobile phone by 2004. But even at the bottom end of the range - pounds 7.5bn - it would be a large mouthful, and a painfully dilutive one at that, for all but the biggest players.

The management cannot say so, but they must be praying for a stock market flotation instead. C&W and MediaOne seem to have been supportive, understanding owners. But who can vouch for the French or Germans? Anyway, think of all the freedom, not to mention all those lovely share options, a listing would bring.

One glance at the runaway performance of the Orange share price would tempt the two owners to the same conclusion. The snag is that they would both need to retain sizeable stakes, at least in the short to medium term, and there is no evidence they want to do this.

C&W sees its future in fixed-line telecoms and would probably like to exit the mobile sector altogether. Certainly it has plenty to spend the proceeds on - building out its European network and consolidating the US business it acquired through the Internet deal with MCI, for a start. It is also doubtful whether the distraction of owning a (comparatively) small overseas mobile interest forms any part of the master plan at Comcast, the cable giant busy swallowing up MediaOne. So a trade sale seems more likely. Whatever the outcome, Merrill Lynch and Lehman Brothers have plenty to get their teeth into in the next few months.

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