Colt shares plunge on bandwidth gloom

Colt is aiming to create a "truly pan-European network"

Shares in Colt Telecom plunged 22% after the firm gave a gloomy outlook for its bandwidth market.

The plunge followed the release of financial results for the July to September quarter that failed to meet analysts' expectations.

The firm, which offers European business customers data and voice services, admitted that demand in the wholesale bandwidth market had fallen.

"These trends are continuing and we do not expect any change before the end of the year," Colt chairman Jim Curvey said.

Colt Telecom is one of the upstarts of the telecoms world and has created a string of city-based networks over the past seven years.

Recruiting corporate customers

Colt now has 29 city networks in total, following its latest additions in the Hague and Copenhagen.

But the costs associated with the initial installation and expansion of its networks have been a drain on finances.

But there was more positive news from the corporate customer business, which has seen sustained growth.

Overall revenue at the company grew by 39% to £234.1m ($331m) during the three month period.

And Colt has recently signed up some high profile new customers, such as law firm Clifford Chance and retail giant Kingfisher.

The firm's profits - stripping out interest, tax, depreciation and amortisation - remained largely unchanged at £6.4m.

Share volatility

Colt shares, along with other telecom operators, were hammered over fears the company would run out of cash before it became profitable.

But the firm's stock reversed the downward trend three weeks ago when Colt announced it would raise £400m through the sale of new stock.

The company's new issue of shares was underwritten by the biggest US mutual fund company, Fidelity Investments, boosting investor confidence and pushing Colt's share price 90% higher this month.

Analysts have pencilled in 2003 or 2004 as a net profit break-even target for Colt.

Colt Telecom shares hit 94p on Monday, 22% down on the day, before closing down 24.5p at 96p.

At 1530 in London (1430 GMT), Colt Telecom's shares stood 21.5p lower at 99p.