Colt Telecom, the fast-growing start-up company which is building high- speed local telecom networks in cities around Europe, announced plans to raise another pounds 500m to fund the construction of a long-distance telecom network and allow Colt to expand its Internet services to large companies. The move comes just eight months after Colt tapped the market for pounds 600m of new capital.
Meanwhile, Hutchison Whampoa, the Far Eastern group, sold a 4.2 per cent stake in Orange, reducing its shareholding in the mobile phone operator to 44.8 per cent.
However, Hutchison underlined its long-term commitment to Orange by stressing that the operator would be its main investment in telecommunications in Europe. "We are committed to maintaining our long-term shareholding in Orange at this level," said Canning Fok, Hutchison's managing director.
Shares in Colt lost over 10 per cent of their value, dropping 131p to 1145.5p, on news of its plans, which analysts described as opportunistic. "Colt has always been a local infrastructure player," said Jim McCafferty, telecoms analyst at SG Securities. "So what are they doing building a long-distance network?"
However, Paul Chisholm, Colt's chief executive, defended the move. "Our customers are telling us that they want seamless end-to-end services from Colt across Europe with the same levels of quality and reliability that we provide over our local city networks," he said.
Shares in Colt, which is 58 per cent owned by Fidelity, the US fund manager, have trebled since October, helped by its entry into the FTSE 100 index. Yesterday Colt said that the cost of building local city networks had increased its pre-tax losses for the year to last December to pounds 55.6m from pounds 32.5m. Revenues more than doubled to pounds 215m.
Hutchison's shares were sold at an average price of 865p each, raising approximately pounds 430m for the group. The move knocked Orange shares 51.5p to 907p, even though the company yesterday posted a buoyant set of full- year results which showed Orange making its first ever operating profit of pounds 15m on revenues up 33 per cent at pounds 1.21bn.
Hans Snook, Orange's managing director, said that the mobile phone industry had had its "best year yet" in 1998 and that, on current trends, market penetration of mobiles in the UK was likely to reach 50 per cent by the end of 2002.
Orange is also confident that it will this year be able to persuade one of the network operators in France or Germany to sell it a large block of airtime, allowing Orange to launch its own service for customers while using a rival network. Mr Snook said becoming a "virtual network operator" would allow Orange to extend its reach to a larger customer base in Europe.
Orange is also planning to offer high-speed data on its network by the end of the year, and will also offer Wildfire, a virtual personal assistant that operates on voice-recognition technology, to its customers.