Equant float to lift telecoms sector

EQUANT, often described as the best-kept secret in the telecommunications industry, is planning a second public offering of shares in the next four to six weeks, according to sources close to the company.

On Thursday, Morgan Stanley, the lead manager for the offering, met Merrill Lynch and Dresdner Kleinwort Benson to discuss the deal, but the banks are not prepared to reveal what was said. One syndicate member said on Friday: "We went silent two days ago."

The offering, which could top the $800m (pounds 500m) sale of shares when Equant went public last July, could generate renewed investor interest in the telecoms sector. On Friday, led by Colt and Cable & Wireless, stocks tumbled after a run powered by Vodafone's pounds 37bn acquisition of its US rival AirTouch nine days ago.

"The market is currently sorting out which companies looked like growth stocks because of inflation, and which companies really are growth stocks," said Mark Tinker, at Warburg Dillon Read. "Along with financial services and support services, telecoms really are growth stocks."

Equant is headquartered in Amsterdam and its shares are listed in New York and Paris. The company was spun off from a Belgian co-operative company called Sita four years ago. Sita was founded in 1949 to manage communications between the world's airports, so Equant has a ready-made network for transmitting data in 220 countries.

"Because it was set up for airlines, the network is both reliable and secure," said Howard Ford, the Wexham-based European president of Equant Network Services.

Sita is criticised for being slow to recognise the value in its network. "You could say they should have created Equant earlier," said Dougal Scott, a telecoms analyst for the London-based management consultancy, Spectrum.

The company faces stiff competition from deregulated monopolies such as BT and AT&T as well as new giants like MCI WorldCom. All are focusing on the exploding business of transmitting data for the world's 3,500 multinationals over the internet. Last year AT&T and BT formed a partnership to sell managed data services globally.

Equant has yet to make a profit. In the six months to 30 June 1998, it reported an adjusted net loss of $6.4m on sales of $319.5m. But its sales are growing rapidly, up 32 per cent in the first six months of last year. Sold for $23 at their initial public offering on 21 July, Equant's shares closed on Friday at $75.50. Half are still held by Sita, whose benefic- iaries are the world's airlines; 25 per cent is held by Morgan Stanley Capital Partners; 10 per cent by airline industry employees; and 15 per cent by the public. Morgan Stanley's stake, obtained before the float for $200m, is now worth $4bn.