Ionica admits defeat in bid to find buyer

Troubled telco Ionica has been put into the hands of administrators following the company's failure to find an investor.

The move comes less than a week after its chairman, Tony Coleman, said he was confident of finding someone willing to provide a #300m loan to secure the company's future.

"Ionica's administrators have assured me that if a buyer cannot be found for Ionica as a going concern, they will ensure a smooth and orderly transition for customers to an alternative supplier or suppliers," said David Edmonds, director general of telecoms watchdog, Oftel.

Any deal will affect 62,000 customers, mostly in East Anglia, the Midlands and Yorkshire, who have also been told that existing services will continue as normal until an alternative provider can be found.

"If someone was going to come forward, they would have by now," said John Matthews, of analysts Ovum. "Administrators are only going to make it more difficult for anyone looking to buy, so Oftel may ask operators such as BT to take over Ionica customers."

Ionica was launched in 1993 with the aim of providing fixed-wireless services using radio waves rather than wires to transmit calls from homes and offices to local telephone exchanges.

Since then it has fallen on hard times. The company's share price has fallen from a high of 421p a year ago to being suspended at just 17p.

An estimated #600m has been ploughed into the company via a bond issue and share placing, but shareholders are likely to lose all of their money.

"This example shows that telecoms is becoming more like a normal market," said Matthews. "In normal business, companies fail from time to time, but this is the first telecoms failure in the UK. The industry will continue to be successful, but the UK is a highly competitive market."