One of the hottest UK companies to list on the London Stock Exchange this year, wireless telecoms company Ionica Group Plc, has been moved from the secondary UK listing Financial Times Stock Exchange Index-250, onto the FTSE small-cap, because the company’s share price has collapsed since flotation in June (CI No 3,181). The shares were originally listed at 3.90 pounds, surged up to 3.99 pounds and have collapsed to 0.76 pounds, a drop in value of 80.5%, that has wiped nearly 500m pounds off the company ‘s market value. Initially, Ionica blamed its problems on lack of capacity of its network, due to the failure of its networking software and hardware to handle more than 3% of the subscribers in its network coverage area. This caused its stock to crash by 39% (CI No 3,295). Ionica’s hardware and software is supplied by Canadian telecoms equipment firm Northern Telecom Ltd, which vigorously denies that its hardware, consisting of its Proximity-I wireless equipment and the software it supplied is at fault, and claims that updates have been provided on schedule. In a Christmas game of pass the blame, neither Ionica nor Nortel is prepared to admit it is at fault. But Ionica has been bullishly committed to rapid expansion as an integral part of its business plan. It also lacks the power to change its chief executive Nigel Playford: due to conditions written into Ionica’s flotation prospectus, Playford can be forced to resign only if he holds less than 5 million Ionica shares, and currentl y, he holds double that amount. The company’s problems don’t end there, because Ionica made 300m pounds in loans before its 640m pound flotation, and as a condition of the loans has to fulfill certain growth targets. These are long term targets which give the company the ambitious goal of reaching 10% of the British telephone market in eight years. In the short term it must have 195,000 subscribers by the end of 1998, and currently only has 31,000. The company, which was once was touted as seri ous competition to British Telecom, and for which it didn’t seem like anything else could go wrong, has now got competition from another wireless outfit, Atlantic Telecom Group Plc, which has won a UK operating license, and plans to launch a national service using equipment supplied by Israeli ex-military communications specialist Tadiran Communications Ltd (CI No. 3,299).
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