Hundreds of thousands of investors in Telecom Eireann got their first taste of stock market volatility yesterday when the shares fell by more than 6 per cent, dragged down by general weakness in the telecoms sector.
Telecom Eireann shares closed 6.7 per cent lower at £3.50 (€4.45), the lowest level since their first day of trading on July 8th. This amounted to a £550 million drop in the value of the company but even after yesterday's fall, the shares remain more than 14 per cent above their issue price of £3.07 (€3.90).
Analysts said the drop Eireann in particular but reflected a weak performance by the European telecoms sector generally. Other leading telecom companies, including British Telecom, also suffered from the downturn.
"The share is down simply because of poor sentiment toward the sector. It is not company specific," one telecoms analyst said.
Recent results in the sector and concern about a competitions complaint to the EU over Deutsche Telekom's fees have led to concern about telecoms stocks, particularly companies formerly in state ownership.
Telecom Eireann contributed to an overall drop in Irish shares yesterday. Despite a recovery in the Irish financial sector, the market closed nearly 1 per cent lower. AIB, which dropped more than 11 per cent in the early part of the week, clawed back more than 2 per cent of its losses to close at £9.21 (€11.70) while Bank of Ireland also ended higher. But the turnaround in the performance of the two leading bank shares was not enough to save the Irish market from the general weakness pervading European stock markets.
The French, German and British stock markets closed between 2 and 3 per cent lower, setting the tone for shares in Dublin.
Worries that US interest rates may rise was the main factor behind the fall in nervous trading ahead of the release later today of key US jobs data.
The figures will be closely scrutinised for clues as to what the US central bank will do with interest rates.