The fallen telecom giant Marconi has reported a sharp fall in sales, as market conditions continue to worsen.

However, it added that the sales slump was in line with a business plan that had been accepted by its creditors.

We have met our business plan sales target for the first quarter despite the difficult market conditions

Mike Parton chief executive

Core sales of �510m ($804m) were down 22% during the three months ending in June, compared with the same quarter last year.

They were down 26% on the previous quarter.

"We have met our business plan sales target for the first quarter despite the difficult market conditions and we continue to reduce our cost base," said chief executive Mike Parton.

However, Marconi's total sales in the first quarter plunged 48% to �592m, including non-core subsidiaries such as its medical and mobile divisions.

Marconi's problems began with the telecom slump, after customers, such as British Telecom, cut their spending on network equipment made by the company.

Talks with lenders

Marconi, which came close to collapse, has been involved in months of negotiations with its lenders.

On Tuesday, it said that the talks were progressing and would probably result in it swapping much of its debt with shares for the creditors.

This would leave existing shareholders with even less than they have now.

The company's shares, which have already been hit by the anticipated debt-for-equity swap, fell 6% to 3.75p in early trading.

Two weeks ago, the stock, which was once worth �12, reached a low of 3.1p.

Fallen on bad times

The company has been forced to undergo a restructuring because it has been unable to cover its �3bn in debt.

The company's value on the stock market, which was once more than �35bn, is now closer to �112m.

This compares with Marconi's bank loans worth about �2.2bn and �1.8bn pounds in bond debt.

Sales of non-core assets earlier in the year have helped to reduce Marconi's debt levels.

Sales of network equipment accounted for 63% of the company's core sales during the first quarter, with the rest coming from Marconi's network services department.