<A> Brit Communications Stocks Jump; Merger Speculation Cited
By Shawn Young
(with VLSI and Asia thius afternoon, goodbye semis, hello telcos, IMO)
NEW YORK (Dow Jones)--The feverish speculation about takeovers that has pushed up the value of many independent phone companies in the U.S. has crossed the Atlantic and boosted the stocks of their British peers, analysts said Thursday.
American depositary receipts of Colt Telecom Group PLC (COLTY), Cable & Wireless Communications PLC (CWZ), Esprit Telecom Group PLC (ESPRY) and Energis PLC (ENGSY) have skyrocketed recently as investors have put a premium on companies that own their own telecommunications networks.
"People have been paying big premiums for scarce assets in the U.S. and that's getting transferred to the U.K.," said Simon Carrington, a London-based analyst for Merrill Lynch Global Securities. He thinks the stocks may have gotten a little ahead of themselves.
"Companies that have networks of their own are perceived as having extraordinary value," said Evan Miller, a London-based analyst at Credit Suisse First Boston Corp. The stocks, he added, are thinly traded, so even a little activity can have a big impact on share price.
In the U.S., companies, like Teleport Communications Group Inc. (TCGI), that own local phone networks and compete with the entrenched monopolies have been snapped up, in Teleport's case by AT&T Corp. (T), which wants to offer local service.
Similar companies still on the market have been trading on the assumption that larger companies might be willing to pay dearly for assets that could launch them into new markets.
That mentality has crossed the ocean, sweeping first the bigger companies and now the independents that have critical assets, analysts said.
"Speculation is percolating down the market," said James Ross, a London-based analyst for ABN AMRO.
Analysts said there has been widespread speculation that AT&T could pay as much as $100 a share for Colt, and Global One will go after Cable & Wireless Communications, which is 53% owned by Cable & Wireless PLC (CWP). Global One is a venture of Sprint Corp. (FON), France Telecom SA (FTE) and Deutsche Telekom AG (DT).
"The group is just on fire," said Susan Kalla, an analyst at Furman Selz Inc. in New York. "It's an undervalued group that has great prospects."
"Colt sets the high water mark for the group, and the other valuations are coming up to Colt's level," she said.
Energis, which provides data transmission for business users, led the group, rising 6, or 16.2%, to close at 43 Thursday after gaining 10.4% Wednesday. Volume was light at 26,100, compared to a daily average of 34,200.
After gaining 10.6% Wednesday, Colt's shares rose another 2.7% Thursday to close at 81 5/8 on Nasdaq volume of 133,900, compared to a daily average of 59,000. Cable & Wireless Communications NYSE-listed shares gained 1 9/16, or 5.8%, to close at 28 9/16 on volume of 277,400. Average daily volume is 18,500. Esprit went up 1 3/8, or 8.5% to 17 1/2 after gaining 3.2% Wednesday. Nasdaq volume was 160,200, compared to a daily average of 57,900. |
