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November 15, 1994


By CBR Staff Writer

Michael Heseltine, UK President of the Board of Trade, cut a cable strung between two telegraph poles to open the new Cambridge offices of Ionica L3 Ltd, the digital radio telephony company, and participated in a fairly aggressive piece of marketing. The stunt, clearly aimed at British Telecommunications Plc and Mercury Communications Ltd, exemplifies Ionica’s advantage over existing services – no wires, therefore no massive initial infrastructure investment required to build a rival network and no Access Deficit Charges payable to British Telecom, Mercury’s major gripe (CI No 2,541). Ionica promises cheaper and better quality telephone services than currently available without having to buy any new telephone equipment or change telephone number. Ionica also promises number portability, instantly available extra lines and extra services, such as three way calling, calling line identification, call diversion and voice mail. The service will be arranged and rolled out by regional television area with several base stations that will communicate through cable network operators to make long distance calls. Ionica’s disadvantage is the wait before the service becomes available, now predicted for third quarter 1995, though trials around Cambridge will begin soon. Ionica is aiming for 5% of British Telecom’s residential market or 1m users within five years. It believes that BT’s 98% control over the 26m lines in the residential and small business sector has led to complacency and a failure to fulfil customer expectations and that this is the weak point that it can exploit to create a new national brand. Ionica expects that attracting the million users will require around UKP100m of investment, as compared with an estimated UKP10,000m required for a wireline national network. On formation Ionica secured UKP50m of equity, 95% of which coming from the UK. Shareholders in Ionica include Yorkshire Electricity Plc, Northern Electric Plc, Kingston Communications Plc of Hull, Telecom Finland and Grupo Pulsar SA of Mexico.

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