Vodafone falls on airwave auction concerns

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The mobile giant suffered one of the heaviest losses on the FTSE 100 (FTSE Index: EO100.FGI - news) .

A chill wind from the Netherlands sent shivers down the spines of Vodafone (LSE: VOD.L - news) investors as worries over the cost of radio waves used to transmit calls put pressure on the mobile giant’s shares.

Vodafone was among the FTSE 100’s heaviest fallers after the Dutch government raised €3.8bn (£3.1bn) on Friday from an auction of 4G airwaves, a figure far higher than the €480m anticipated.

Dutch telecoms group KPN (Amsterdam: KPN.AS - news) , which spent €1.35bn in the sale, has said it is cutting its dividend to cover the cost of the 15 licences it had secured, while analysts today speculated the auction had set a precedent that could see mobile companies facing higher prices in future sales. Vodafone paid €1.38bn for nine licences.

JP Morgan Cazenove analyst Akhil Dattani said the Dutch sell off confirmed the broker’s concerns over future European auctions, including one in the UK next year.

Indeed, the success of the Dutch process suggests the UK Treasury could net more than the £3.5bn the Office for Budget Responsibility expects it to raise from its auction, which would be a boon as the Government slashes costs as part of its austerity drive.

Nevertheless, there was further bad news for Vodafone from Spain. The country’s telecoms regulator said the company lost 278,000 customers in October as cash-strapped Spaniards got rid of mobile phones to save money. Vodafone shares ended the day down 2¾ at 158.2p.

The approaching Christmas holiday and ongoing political negotiations over the US “fiscal cliff” - tax hikes and spending cuts that kick in next year - meant traders started the week by taking some money off the table.

The FTSE 100 fell as low as 5,881.01 before recovering some of its losses and closing down 9.61 points at 5,912.15, while the mid-cap FTSE 250 shed 25.66 to 12,218.58. The latter has retreated from a record high reached on Friday.

“With economic data relatively thin on the ground, seasonally low volumes and persistent worries over a forthcoming deal to avert the fiscal cliff, traders are cutting exposure to risk [for fear] of getting their hands burnt,” said Ishaq Siddiqi, a market strategist at ETX Capital.

As 2012’s last full week of trading in London got under way, others in the market were looking ahead to next year. Economists at Jefferies reckoned the prospects for Britain were brighter, arguing that “the UK is likely to be one of the few economies showing positive GDP growth within Europe in 2013”.

Among the broker’s top European share picks for next year were blue-chip exploration company Tullow Oil (LSE: TLW.L - news) , up 6 at £12.05, and miner Rio Tinto , 80p better at £34.70.

Chip designer Imagination Technologies was another, although the shares dropped 25.7 to 383½p after the company brought to an end a bidding war for MIPS Technologies’ operating business with an offer of $100m (£61.7m). FTSE 250-listed Imagination, which was competing with CEVA to land MIPS, originally agreed to pay $60m to seal the acquisition, but will now spend much more.

Back on the main board, shares in British Airways parent International Airlines Group flew higher after its Spanish carrier, Iberia, said it would negotiate with unions over job cuts. The move, which lifts the threat of industrial action, sent the shares up 5.8 to 179½p, and made IAG the FTSE 100’s best performer.

Meanwhile, some companies had unwelcome early Christmas gifts for investors. Aggreko , the temporary power group, sounded its second profit warning this quarter. Investors sent shares in the blue-chip business tumbling 461p to £16.64 after the company said its performance next year is expected to be “slightly lower” than 2012.

Mid-cap energy services group Hunting was another company that had disappointing news for traders. Dennis Proctor, chief executive, told the market that “the short-term outlook is increasingly cautious due to the economic climate seen in a number of our operating regions”. Investors took fright, and Hunting shares shed 48½ to 757½p.

Surging higher at the other end of the mid-cap index was Egyptian gold miner Centamin . The group has been beset by problems over recent weeks, culminating in the suspension of operations at the Sukari mine, its principal asset. Centamin said the situation at Sukari would return to normal “in the coming days”, and relieved traders sent shares in the precious metal producer climbing 7½ - 21.7pc - to 42.14p.

One dealer also said that continuing speculation that China National Gold is close to a takeover of African Barrick Gold helped the FTSE 250 (FTSE: ^FTMC - news) group advance 20½ to 442½p.

Elsewhere, Kentz Corp was chased 4.7 higher to 398½p after the engineering group secured three contracts in Iraq with a combined value of about $55m. Although not “material” for Kentz, analysts at Oriel Securities argued that the wins meant the group was well positioned in the Iraqi oil and gas market.

Among the small-cap energy companies there was also plenty for traders to sink their teeth into. Fortune Oil (LSE: FTO.L - news) jumped 1.64 to 10¾p after announcing China Gas Holdings is buying its natural gas division, while IGAS Energy (LSE: IGAS.L - news) advanced 10½ to 87¼p on reports Exxon Mobil (NYSE: XOM - news) was in talks to purchase a stake in its Lancashire shale gas project. Last week’s news that Alfa Group will take a stake in Regal Petroleum continued to support the Aim-listed company’s shares, which gained 6 to 36¼p.