Ionica Plc, the UK radio telephony company whose shares have plummeted since its 1997 flotation, revealed its depressing third quarter numbers this week, confirming the dire straits in which the company now finds itself. Three senior board members were kicked out last week in advance of these results which show net losses quadrupling to 35m pounds in the quarter. Revenue increased to 2.8m pounds in the three month period, up from just 689,000 pounds last time, but operating costs soared by 120%, driving the company into huge losses. As well as the escalating operating costs, Ionica is having to fund the expansion of its wireless local loop (base stations connect customers to Ionica exchanges by radio link) and hence it is totally reliant upon the support of its bankers. On current rates of cash consumption, Ionica will need further financing in the latter half of 1998. And having admitted to being in breach of banking covenants for its existing 300m pound credit facility, the company is now warning that further funds are not assured. So the new chief executive Mike Biden, who took over from founder Nigel Playford last week, has decided to change tack, reigning in geographical expansion and concentrating on existing areas of coverage in the east of England where equipment saturation problems have reduced subscriber uptake. This will not please Ionica’s banking consortium, headed by SBC Warburg Dillon Reed, whose lending agreement centered around Ionica building up its subscriber revenues as fast as possible to cover the cost of capital. Interest charges in the first nine month of the year have cost Ionica 16m pounds, twice as much as its 8m pound revenues. At the end of 1997, Ionica had around 35,000 subscribers. Its bankers wanted to see 200,000 by the end of 1998. Negotiations with the various bankers are continuing, the company said. The shares were trading at 72 pence on Wednesday, down 11.5 pence. Ionica floated in July at 390 pence.
