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July 4, 1993

FASCINATION IN IONICA REACHES FEVER PITCH AS HINTS APPEAR OF NEWS TO COME SHORTLY

By CBR Staff Writer

There’s nothing like a bit of mystery to pique fascination, and on the basis of the old City adage sell on a strike (the strike refers to the announcement that oil or gold has been found rather than that any horny-handed sons of toil have downed tools, and the advice reflects the fact that rumours that a company has struck a rich seam fuel the share price, but once the firm announces the extent of its find, interest falls away), fascination with Cambridge-based radio telephony operator Ionica LS3 Ltd of Cambridge will climb to fever pitch until it actually reveals its hand. What is out in the open is that Ionica has a full public telecommunications operators licence and has been allocated two 15MHz bands at 3.4GHz with which it plans to offer a full telephone service and aims for 5% of the UK market within 10 years. It indicates that it intends to use existing fixed networks for its trunk business, and talks of deals with electricity companies or the British Railways Board, although it could do a deal with Mercury Communications Ltd, or British Telecommunications Plc if the latter is keen enough to undercut Mercury. The fascination has been generated by the fixed radio technology that will provide the local loop, which is digital and described as new. As reported, the radio residential and base station equipment will all be manufactured by Northern Telecom Ltd at the old STC plant in Paignton, Devon; that contract is valued at UKP100m over the next few years, but there has been a flurry of excitement over the Ionica contract for exchanges, which has not been placed yet and may not go to Northern Telecom – GEC Plessey Telecommunications Ltd has been mentioned as a contender. The Ionica system uses a fixed radio link to provide the final drop from Ionica’s exchange to the home or business, thus completely avoiding the costs of installing cables. Ionica claims that its radio links will compete more effectively with the fixed link network than cordless or mobile technologies, saying that since its system is not designed for mobility, it has not incurred the expense of a mobile system. Everyone else is coming with a mobile solution for an alternative fixed local loop. That is their problem. The fixed market is 10 times the size of the mobile market. We cannot have our costs determined by mobile prices, the company says. Telecom Finland is of course the first overseas company to adopt the microwave-based wireless communications technology, but Ionica is also in negotiations to sell the technology into Eastern Europe, Asia and America.

Finland’s national phone company

Finland’s national phone company will use the technology to extend its local loop network in areas of the country where the local phone companies will lose their monopolies next year. As part of the deal it has bought a minority stake in Ionica. Ionica has also applied for a licence in Hong Kong to compete with Cable & Wireless Plc affiliate Hong Kong Telecom Ltd. The main shareholders in Ionica LS3 are Northern Electric Plc, which bought a stake after its licence was approved. The others include Yorkshire Electricity Plc, Kingston Communications Ltd, Symbionics Ltd, 3i Plc and Robert Flemings Investment Trust. Northern Electric plans to offer Ionica fibre-optic transmission over its electricity network. Ionica is expecting to sign its first subscriber by the end of next year and says that peak funding, the point at which revenues balance expenses, will be UKP100m. We expect around three years after launch to become profitable.

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