UK Carriers' Shares Slump
Energis stock crashed 57 percent yesterday, falling to 23 pence (US$0.32), after issuing its third profit warning in six months and saying that it may breach banking convenants (see Energis Issues Profit Warning). Its share price fell another 19.5 percent this morning, to about 18.5 pence (US$0.25) at midday in the U.K.
Fibernet appeared to be following suit after issuing this morning's profit warning (see Fibernet Gives Gloomy Outlook). At midday in the U.K., its share price had slumped from £3.225 to £2.175 ($3.07), a 40 percent drop.
Both companies were stock market stars just over a year ago. Fibernet reached a high of nearly £30 ($42) in December 2000. Energis nearly reached £8 ($11.3) in November 2000.
Energis has similarities with Enron Broadband Services Inc. (see Enron's Empty Bandwidth). It was spun out of the U.K.’s National Grid, which operates the power transmission backbone in England and Wales. Like Enron, it’s a bandwidth trader, and that makes it particularly vulnerable to the current oversupply of network capacity.
Fibernet is in a similar position. It also operates a fiber backbone in the U.K. and is rolling out similar projects in France and Germany. Most of its business comes from selling raw bandwidth.
Sooner or later, the balance between supply and demand for bandwidth will swing back in favor of Energis and Fibernet, because traffic on telecom networks is continuing to grow.
In the case of Energis, the key question is whether it can stick around long enough to see this happen. In its trading statement yesterday, it announced further cutbacks in capex. This year’s spending will be reduced from $340 million to $300 million ($480 to $425 million), and next year’s spending will be “no more than $200 million [$282 million].”
— Peter Heywood, Founding Editor, Light Reading