Marconi facing fresh write-offs

AILING tech group Marconi has warned shareholders that it could be forced to slash the value of its assets yet again following further falls in demand for telecommunications equipment.

The group also revealed core sales plunged 22% to £510m in the June quarter compared with the same time last year. This would leave an operating loss 'slightly higher' than the £116m loss for the three months ended March, it said. Restructuring charges would generate additional losses of £90m.

The warning could have substantial repercussions for Marconi's attempt to strike a debt-for-equity swap with banks and bondholders over its £3bn of net debt. This has jumped £152m in the past three months, due partly to restructuring costs and interest payments. Any settlement with its creditors will all but wipe out the remaining value of the existing shares.

Marconi wrote off £3.8bn last year and the market had hoped that a recovery in the telecoms industry would prevent the company from having to add to this. But it said today a full review would be undertaken as part of its interim accounts at the end of September: 'Management believes that further provisions and writedowns could be necessary.'

The company had been hit by further spending cuts by major US telecoms operators, cutting sales there by 39% in the quarter compared with the same time last year. There had also been a 'significant softening' of the market on the Continent, particularly in France and Germany. 'The group has experienced a decline in demand for its fixed wireless access products where Germany represents an important market place,' it said.

There were some signs of stabilisation in the UK and Italy, though demand remained low. A spokesman said the company was still aiming to float its Marconi Strategic Communications Business on the Milan stock exchange in September.

However, Italy's state-owned defence group Finmeccanica said late yesterday that it had resumed talks to buy the mobile communications unit.

'There were the conditions to reopen the negotiations, which we moved on and we are proceeding with them, but there remains the flotation which is going ahead and we are not interested in having a minority holding,' Finmeccanica chief executive Roberto Testore said.