mm02 shares collapse

A crash in the share price of mm02 saw £500m wiped off its market cap today on news that its parent, BT, is to launch its own virtual mobile network.

As of 15:40(BST) mm02 shares had hit an all time low of 54.25p, down by 11.1 per cent from an opening price of 61p this morning.

Arnab Roychowdhury, equity analyst at Barclays Stock Brokers, said the sudden share crash was instigated by BT's announcement yesterday.

BT Retail intends to operate as a virtual operator, leasing airtime network capacity exclusively from mm02 but Roychowdhury said the problem for mm02 is BT's target customer group.

He explained: "mm02 makes the vast bulk of its profits from UK corporate customers. If another competitor comes into this market and targets that customer segment, particularly one like BT, with a strong customer base anyway, mm02 are in trouble."

He added: "All BT has to do is transfer its fixed line customers to its mobile business. It's got more than its foot in the door."

Other mobile operator stocks have been slipping over the course of several days in the run up to the sector's first quarterly results announcement. At 15.40 (BST) today Orange was down 5.5 per cent from opening and Vodafone was down 5.6 per cent.

Roychowdhury said the crashes are indicative of a change in investor faith in the mobile market's future technologies.

He explained: "These stocks have been priced on the growth of mobile data services but the visibility in this area is pretty poor. No one's sure what these technologies will be, how they will be priced or whether anyone will even like them.

"Previously we were optimistic about mobile data services, now we are pessimistic. We don't think these services are going to be successful as any number of things can go wrong."

Roychowdhury was unclear as to when the mobile operators' stocks will stabilise. He said: "It's hard to see when this movement in the market will stop. It's rather irrational."