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Telecommunications company Ionica Plc saw its share price crash by 40% as it faced a massive loss of investor confidence when it revealed that a lack of network capacity was leading to a slowdown in sales. The company, launched on the stock market in July, offers a rival service to British Telecommunications Plc using wireless technology. But it now says that some base stations had been unable to cope with demand. We’re a victim of our own success, said a company spokesman. It claims that problems arose when the penetration rate rose above the 3% mark in an area. A software upgrade, which would double capacity at each base station, has been ordered from its partner Northern Telecom and is scheduled to be delivered by spring next year. Ionica’s progress is being closely watched by companies throughout the world as it appears to offer an inexpensive way to take on the major telecommunications companies and the current problems – which the company says has put it about four months behind schedule – is likely to dampen enthusiasm. City analysts are skeptical about its future progress and it seems nanve, to say the least, for the company to ferociously market a service and then turn down customers when it hit the 3% penetration ceiling while the cable companies are achieving penetration rates of close on 30%. Now it must sweat over whether Northern Telecom can deliver the new software on time – as projects as this kind have a habit of slipping behind schedule. Ionica also seem happy in its niche as a telephony supplier – while broadband wireless technologies are under development that ought to give it loftier ambitions. And it has only just started tapping the business market, revealing a bizarre sense of priorities. Ionica’s shares currently stand at 145.5 pence – compared with a flotation price of 390 pence.

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CBR Staff Writer

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