The telecommunications sector reacted negatively to the confirmation that Germany's telecoms regulator will allow the six winners of third generation (3G) mobile licences to share parts of the new mobile networks, the radio base stations, towers and antennae.
The companies which had been expected to benefit were Sonera and Telefonica through their joint venture Group 3G, KPN through its mobile offshoot E-Plus, British Telecommunications through Viag Interkom and France Telecom through the quoted operator Mobilcom.
One analyst said he thought the market had been expecting bigger concessions from the regulator. While any handing back of licence fees had been ruled out, "the market had been looking for a bit more," such as sharing of the switching systems.
KPN fell the most, losing 8.9 per cent to #8.19, compounding the almost 20 per cent loss of last Friday, the last day the shares traded. However, this was also because investors were continuing to worry about the prospect of a #5 billion cash call.
Mobilcom fell 4.3 per cent to #17.65 and BT lost 0.7 per cent to 441p. Other companies recouped their losses in the afternoon as the Nasdaq opened higher on the strength of some helpful comments from US techs. Telefonica ended almost unchanged at #17.60 and France Telecom was 1 per cent up at #64.20. The best riser was Sonera, which gained 4.6 per cent to #10.20.
There were some good gains in technology, partly thanks to the US news. Philips Electronics rose 5.2 per cent to #33.42 and SAP rose 4.3 per cent to #176.50, making a two-day gain of more than 7 per cent. Goldman Sachs upgraded the stock and added it to its European Recommended list.
STM recommended Chip maker STMicroelectronics gained 6 per cent to #43.15. Deutsche Bank said that while the company's recent presentation to analysts "gave little indication to boost confidence that current consensus expectations will be met, we believe that the recent sell-off in STM's stock provides a good buying opportunity and reiterate our 55 price target".
Telecom equipment makers had a good day. Alcatel was up 3.1 per cent to #30.21, Ericsson up 4.5 per cent to SKr70 and Nokia up 5 per cent to #36.20.
In a research note, Merrill Lynch said "in the long term Nokia will be a winner in the mobile industry, leveraging not only its handset dominance but also its improving position in the infrastructure space . . .we believe it will gain at least 38 per cent market share this year . . .with operating margins at 18.2 per cent."
