We're in a deflationary spiral where telecoms assets are concerned

James Enck Daiwa Securities

MMO2 shares closed down at 68 pence, losing 3.5p but recovering slightly after hitting 66.25, their lowest level in the stock's brief history. This valued the company at just �5.9bn.

MMO2 floated on 9 November last year at 74 pence a share.

Vodafone, whose shares have fallen 25% this year, also slipped lower and Cable and Wireless shed 4.4% to hit a 10-year low.

The global telecoms sector has been shaken by falling market valuations of their assets, high debt levels, and doubts over the ability to profit from third generation (3G) licenses or the current subscriber bases.

MMO2 shares hit a high of 93 pence on 23 November and have since fallen almost 22%.

Outlook poor

"We're in a deflationary spiral where telecoms assets are concerned and there's not enough confidence in business models or cash flows to outweigh that at the moment," said James Enck, telecoms analyst at Daiwa Securities.

Cable & Wireless fell in a sell-off sparked by an admission that it booked non-cash deals as revenues.

The revelation comes as the US government probes Global Crossing after allegations that it had used improper accounting methods that artificially inflated revenues.

MMO2 groups together the former BT Wireless brands of Cellnet in the UK, VIAG Interkom in Germany, Telfort in the Netherlands, and Digifone in the Republic of Ireland.

Both MMO2 and Vodafone have expressed concerns about their German operations, which are struggling to maintain growth.