Competition is poised to increase for BT in its core residential telephony market as rival Carphone Warehouse prepares to launch its revamped broadband internet access service on Tuesday.
Shares in BT eased 3.5p to 217p yesterday as Investec Securities warned of a "massive escalation" in the use of local loop unbundling, the regulated process under which BT hands over the control of local phone lines to its rivals such as Carphone. Unbundling in effect ends BT's contact with a household because it can no longer bill for line rental.
Investec warned that investors are currently "enthused" by the rate of broadband take-up at BT but "we strongly believe that such enthusiasm will dissipate as price declines, led by Carphone, exceed the market's forecasts by summer 2006".
The broker expects there to be more than 3m unbundled lines by the end of next year - a 10-fold increase on today - and "see its arrival as fundamentally negative for the UK fixed-line sector" in particular BT, which the broker downgraded to hold yesterday. Carphone eased 2.5p to 307.5p.
Overall, the FTSE 100 closed down 19.6 points at 6,026.1 as Wall Street opened lower and mining stocks succumbed to some profit-taking.
Energy shares were a bright spot as UBS upgraded its view of the sector with BP up 9p at 682p and BG up 3.5p at 740p. Royal Dutch Shell A shares rose 6p to £18.44 with the B shares up 10p at £19.28. The broker said that with little sign of the oil price falling the sector is worth buying. Shell also received a boost from news it plans to inspect its EA oilfield off the coast of Nigeria in the next few days with a view to restarting production as soon as possible.
Barclays was the day's biggest riser, up 15p at 701p on continued bid speculation. ICI added 4.25p to 365p as it became the latest blue chip firm to succumb to bid rumours, with DuPont named as a potential suitor. In bid situations that are actually occurring, BAA added 12.5p to 847p as the board of the airports operator rejected what was in effect a hostile bid from Spain's Grupo Ferrovial at 810p a share.
Mitchells & Butler added 4.5p to 486p. After the market closed the Takeover Panel said it has set a May 8 deadline for R20, the buyout vehicle of Robert Tchenguiz, to make his bid for the owner of All Bar One.
Away from the main index, rumours about problems at iSoft refused to go away despite the company's assurances that all is well. Shares in the healthcare software group lost a further 18.25p to 112.5p and were the biggest losers in the FTSE 250 for the second day running.
Overall the FTSE 250 closed down 31.5 at 9,923.1 points with the small cap index up 1.3 at 3,653.7 points. The London Stock Exchange eased 8.5p to £10.36½. After the close it emerged that several major users of its rival Euronext plan to buy up to 5% of the bourse to have a say in its future, which may put Euronext back in play.
Among the small caps, nCipher fell 7.5p to 245p as its US suitor SafeNet jilted the IT security company after last month's decision by the Office of Fair Trading to refer the deal to the Competition Commission. SafeNet, based in Maryland, made a recommended 300p-a-share offer in February which valued nCipher at about £86.1m.
The OFT was concerned because the two companies are the largest suppliers of gizmos that encrypt and decrypt data, which allows the secure transport of information across networks. The OFT was worried that the deal might lead to increased prices for customers.
Late Thursday, SafeNet said the additional review process would involve "considerable expense" as well as taking several months so it had abandoned the bid, as allowed under the offer's terms. Yesterday nCipher tried to reassure investors, saying it agreed with SafeNet's decision because of the "time, cost and potential disruption to business" that could result from the protracted review. It added there were "good growth opportunities" in its markets.
Charles Stanley upgraded its stance on the stock to strong buy, saying the shares are worth 300p on their fundamentals so there was actually no premium being offered in the SafeNet deal.
Down on Aim, shares in investment group Elite Strategies added 1.62p to 4p as its main investment Retec Interface signed a £5m three-year deal with J Sainsbury to put its point of sale entertainment product into 100 stores.
Shares in Pavilion Insurance Network gained 0.12p to 4.5p as the insurer announced first-quarter sales hit "record" levels compared with last year while DVD technology firm Zoo Digital added 0.12p to 3.25p after announcing that licensing deals will generate £1.5m this year. Genesis Petroleum Corporation dropped 0.42p to 2.15p as the independent oil and gas producer announced plans to raise £3.5m in a placing at 1.25p a share. The cash will be used to support drilling plans in the North Sea. Mechanical and electrical contractor Metnor Group added 13p to 249p after a positive outlook statement alongside annual results. Finally the market welcomed IXEurope, the data hosting business that tried to float in late 2000. The shares were placed at 22p and finished their first day of dealings on Aim at 30p.
At home with Google
No business sector is safe from Google it would seem. Having moved into financial news, retailing, online payments, mapping and many other segments, the California-based search engine is now testing out a homes and property website. While Google Real Estate is only in what Google calls beta-test, and only offering homes for sale in the US, it has to be a worry for the likes of recently floated Rightmove, flat at 362.5p, Savills, down 10p at £12.80, and Countrywide, up 5p at 522.5p. If Google does make a serious move into the market for advertising property, it is also likely to create a headache for newspaper groups like Daily Mail & General Trust, down 13p at 667p, which also owns the websites Find a Property and Prime Location.