Telecom shares ring up rises as Vodafone nears deal

There is nothing quite like a whiff of industrial consolidation in the air to send the pulses racing. Market-makers in telecom stocks reached for the blue pens yesterday as Vodafone confirmed reports that it was close to a deal with Energis, the telecoms network owned by the National Grid, and that it was also talking to other telecoms providers about offering fixed as well as mobile services.

Vodafone's share price performance, up 6.5p to 302p on the day, buoyed its sectoral neighbours, some of which made ground in the face of bearish scribblings by analysts.

Orange was a case in point, closing up 3p at 211p despite a bearish sell note being pushed out by Societe Generale Strauss Turnbull.

Securicor - which is being recommended by Morgan Stanley - jumped 11.5p to 268.5p; Cable & Wireless rose 9.5p to 607.5p; and BT, which releases first-quarter figures later this week, firmed 7p to 421.5p.

Overall, the market had a down and up day. The first day of the summer holiday season started on a cautious note with the FTSE 100 index losing a touch more than 16 points barely an hour after the opening bell.

However, the telecoms rumours and a firm start to morning dealings on Wall Street reversed the trend and Footsie finished the session at 4,862.6 - a rise of 11.1 points. Sterling's punishment on the foreign exchanges largely went unnoticed.

BSkyB was among the most notable share risers, closing14p better at 448p. Analysts said the shares were reacting to the company's plans for hefty price increases for its premium packages.

Sky sent letters to subscribers over the weekend saying it would increase the price of its top tier of channels by pounds 3 a month from the beginning of September. Customers will now pay pounds 29.99 a month for premium services although the basic tier will remain unchanged at pounds 11.99.

The shares were also helped along by a buy note from Sky's advisors, BZW. Merrill Lynch is also said to be keen on the stock. The share price has suffered in recent months after the company's ebullient chief executive and managing director, Sam Chisholm, and his well-respected deputy, David Chance, both announced they were to quit. The satellite operator's enforced withdrawal from British Digital Broadcasting has also been blamed for the share price's poor performance.

Elsewhere, BAT Industries, which firmed 6p to 533.5p on a "strong buy" note from Societe Generale. SocGen, which reckoned BAT was worth around 673p a share, said the US tobacco settlement removed uncertainties for shareholders. After re-aquiring Cigarera La Moderna last week, BAT was more likely to demerge its tobacco and insurance operations, SocGen suggested.

ICI was another prime mover among the blue chips, especially in late afternoon trading. Analysts said the 28.5p surge to 946p was driven by a recommendation from Bear Stearns at the tail end of last week. The US investment house underpinned its comments by buying ICI stock yesterday.

British Airways surged 12.5p to 643p, after news that it would take pounds 50m from the US flotation of Galileo International, the global computer reservations firm in which it has a stake. The stock was also helped by hopes that talks with unions would resolve the strike by cabin crew. BA's shares hit a five-month low last week after worries about the strike and downgrades by several investment houses.

Nervousness about forthcoming results dented shares in banks. Figures from Abbey National - down 9p to 810p - are due today. Halifax performed poorly, shedding 16.5p to close at 704p; and Lloyds TSB, reacting to Salomon Brothers' "lukewarm" sentiment on the stock at current prices, finished down 13p at 646.5p. Salomon said its enthusiasm for Lloyds and HSBC Holdings - which bucked the trend and gained 33p to 2,120.5p - was "tempered" by the strong year-to-date appreciation of the shares.

Christian Salvesen closed down 17p at 302.5p, after a growing feeling in the market that the company would not bid for Hays. Newcastle United lost 7p, closing at 116.5p, with investors concerned about the effect on the team's performance on the football field following the injury to Alan Shearer who will be out of action for months.

Fairplace Consulting, a company offering careers training for the financial services sector, made its debut on AIM yesterday at 3p a share, and gained0.75p by close of trading.