MARKET COMMENT
The Week Ahead: Ring, Ring It's Vodafone, Marconi and C&W

By David Kuo (TMFDragon)
November 9, 2001

Carburton Street, London -- With the trio of central banks' interest rate cuts in the bag, investors can now focus their attentions on corporate news and there's plenty of action, especially from the telecom sector, to keep investors occupied throughout the week.

Vodafone Group (LSE: VOD), the world's largest telecom company has interim numbers for the market on Tuesday. Vodafone, like many other mobile phone operators, has focussed its attention on improving average revenue per user (or ARPU) and this is likely to help improve margins. Last month Vodafone reported an improved performance in the group's operations and revealed customer growth was ahead of expectations. This was achieved despite a reduction in subsidies for telephone handsets.

Cable & Wireless (LSE: CW.) has been tight-lipped over speculations that it might make a bid for Colt Telecom (LSE: CTM). C&W, which has an enviable cash pile of about £4b, has been linked with merger talks with a number of cash-strapped alternative telecom companies. In September, C&W warned that first half revenues would be 5% lower than last year and it had taken actions to eliminate lower margin businesses. Cable & Wireless relates its first half story on Wednesday.   

And over in the telecom equipment sector, Marconi (LSE: MONI) steps forward with first half numbers. Marconi now reports four times a year so investors should get a better idea of what is going at the company. The medical systems business has been disposed of but there could be a few more nuggets that the embattled telecom company could sell off to pay down more of its debt. Marconi said it wants to get net debt down to £2.7b to £3.2b by March 2002 from the present level of £4.3b. Much of this will be accomplished through the buyback of bonds from the funds that were generated from asset sales. In the second quarter, Marconi expects to report that it has broken even at the operating level helped by its cost containment strategy.

Emap (LSE: EMA) expects first half profits to be unchanged from last year. Given the deterioration in the advertising market, this is quite remarkable. The magazine publisher, whose titles include FHM for the boys and More for the girls, expects underlying revenues to grow by 3% helped by demand for its consumer titles. But the company did warn that its radio business has been less buoyant. Emap has interim numbers for the market on Tuesday.

Energis (LSE: EGS), the company that provides fixed line telecom services for business customers, said, in a trading update last month, that it expects first half sales to be just below £500m compared with £368m last year. Profit before tax, interest, tax, depreciation and amortisation is anticipated to be unchanged from the last quarter at £75m. The company also said many of its customers have focused on telecom solutions that help to reduce cost and drive efficiency and this has led some customers to defer taking business decisions. Energis also has interim numbers on Tuesday. 

There are also interim reports from Land Securities (LSE: LAND), 3i Group (LSE: III), BOC Group (LSE: BOC), Invensys (LSE: ISYS) and third quarter numbers from Reckitt Benckiser (LSE: RB.). And away from the blue chips, the whisky maker Glenmorangie (LSE: GMGA), whose shares have put on a spirited performance, up 40% this year, has interim figures on Thursday and Hornby (LSE: HRN), the model maker rolls in with its half time numbers on Friday.

The author owns shares in Vodafone, Marconi & Land Securities.