BT's mobile telecoms OPERATION finished its first day of trading at well below pre-demerger forecasts
BT's mobile telecoms arm, mmO2, debuted at about 80p per share in its first day of full trade on 19 November, near the level established during conditional trading.
At 8.30am, 35 minutes after the market opened, its shares were unchanged from the close of conditional trading last Friday at 80p, on volume of 12.9 million shares traded.
The stock price is well below forecasts issued when the demerger was mooted earlier this year, but slightly above the gloomiest market forecasts which centred around 70p. Shares in BT Group, the 'rump', or business remaining after the demerger of the mobile assets, were trading in light volumes. At 8.30am, BT Group shares were at 283p, up 5p, or 1.8%, on volume of 708,000.
The demerger from BT created the fifth largest wireless company in Europe with a market capitalisation of more than £7.26bn led by chairman David Varney.
United Business Media, the owner of the PR Newswire press release service, was relegated from the FTSE 100 Index after UK stock trading closed on Friday 16 November, said FTSE International, which calculates the benchmark, to make way for mmO2's listing.
On the listing of mmO2, Varney said: 'I am delighted mmO2 is starting life as an independent company with simultaneous listings in London and New York, as befits a business with our size and international dimension.'
The company has 100% ownership of mobile network operators in four countries: the UK (BT Cellnet), Germany (Viag Interkom), the Netherlands (Telfort Mobiel), and Ireland (Digifone). It also has operations on the Isle of Man (Manx Telecom) and a leading European mobile internet portal business, Genie.
It was the first company in the world to launch and rollout a commercial GPRS (or 2.5G) network and has secured third-generation mobile telephony (3G) licences in the UK, the Netherlands, and Germany. The demerged company expects to apply for a 3G licence in Ireland when the application process commences. It has about 17 million clients in total and more than 15,000 employees, with revenues for the year ended 31 March 2001 of £3.2bn.
Analysts' views on the demerger are mixed however. Few have come out with sell recommendations. One of the gloomier forecasts for mmO2 was published by Schroder-SalomonSmithBarney (SSSB).
SSSB set a target price at launch for mmO2 of 75p per share on a launch price of about 80p, with analysts stating that the company has 'a hefty turnaround challenge.'
The group said returns on the business may never exceed its cost of capital. It characterised the stock as a 'high-risk, long-duration stock with sentiment, not absolute value, the best predicator of trading performance.'
More than 80% of that value is in Cellnet, the UK wireless business, with turnaround necessary in the German and Dutch businesses.
Despite its low-price target, SSSB believes the fair value of the company could be as high as 109p to 123p based on the sum of the parts, and assuming a modest turnaround.
Market sentiment will not, it believes, allow that to be reached. If the turnaround does not materialise, the share price could fall, SSSB believes, to as low as 60p.
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