Orange value falls by half

Analysts say crippling costs faced by firms who successfully bid for the right to develop the third generation (3G) mobile-telephone licences have cast a cloud over the whole sector.

Most observers believe buying shares in Orange will not earn you a quick buck, but could prove a moneyspinner in the long term. The shares will be priced at between £7.35 and £8.62 each.

David Harbage, an analyst with Barclays Stockbrokers, says that although he "errs on the side of caution" Orange is a leader in its sector and is likely to succeed in the end. This means that people buying shares may have to wait some time before their value increases significantly.

Over the past year feelings towards the telecoms sector have swung from overexcitement to the other extreme, Mr Harbage says.

"Over the past 12 months we have seen the mobile companies write very large cheques for the 3G licences," says Mr Harbage. "Their balance sheets have gone from pretty healthy to fairly stretched."

Another city source, although admitting that some telecoms are "debt burdened" , believes many private investors will be tempted by the 32p a share discount.

"It's best to buy when down - in other words the current time," he says. "In an uncertain world it looks like a good investment."

The sector has also been harmed by alleged health risks caused by radiation from handsets, although an official report last year found no proof of this.

There have also been concerns about the role of Hans Snook, Orange's founder, who has resigned as the firm's chief executive. He will remain as a consultant but one shareholder quoted in the Mail on Sunday described Orange without Mr Snook as resembling the "The Starship Enterprise without Kirk, Spock and Bones".