Board members finally agreed that little else could be done to save the ailing company after a much-hoped for 'White Knight' failed to come forward. Shares in Cambridge-based Ionica, which floated last July at value of £660 million last year, were suspended valued £0.17 on Monday. Last July, its shares were worth £280 million, but are now believed to be worthless.
Ionica pioneered alternative telephone networks using digital radio waves for the transmission of calls rather than through conventional cables and wires. The company has 62,000 users scattered across east Anglia, the Midlands and Yorkshire.
It has been widely reported that its expansion plans were scuppered by glitches in its computer network, which in turn hit sales. But analysts rejected this claim, arguing that computer system were being used as the fall guy.
"There were computer problems early on but these are being blamed to a much greater extent than is merited. You cannot blame equipment for a shortfall in sales," said John Matthews, principle consultant at Ovum.
"There were over ambitious financial forecasts at the time of flotation that were hard to justify. The management and financial advisors have to take responsibility." He added.
Wireless telephony is well suited to rural regions and developing countries where networks need to be rolled out quickly without digging up the land. Most of the UK has been wired by monoliths like BT, and observers argue that Ionica was over ambitious in its aim of 7 per cent market share. Cable companies have struggled to achieve 20 per cent between them since their inception.
Investors stand to lose "spectacularly" from Ionica's collapse, said Matthews. The illustrious list of backers and investors includes Yorkshire Electricity, SBC Warburg, Morgan Stanley, Northern Electric, Scottish Widows and 3i. Company staff are also shareholders. Yorkshire Electricity wanted to dispose of its assets almost a year ago, but remains saddled with a large portion of them and will lose out.
Ionica's Chairman, Anthony Coleman said: "Naturally we are disappointed. The Board had been hopeful of securing the investment necessary for Ionica Plc to continue trading and expand its service. Customers should not be unduly concerned. We have been in discussions with Oftel and we expect that a normal service will be provided to our customers whilst the Administrators make their arrangements to ensure ongoing continuity of service."
Meanwhile, rival wireless communications provider Atlantic Telecom is seeing business boom. Atlantic, which was rumoured to be one of the companies in talks with Ionica, almost ran out of cash earlier this year. But, according to Matthews, the company was better prepared in its business plan.
"Atlantic is a smaller operation and has no plans to take on BT. It would have been brave for this company to help out Ionica and Oftel wanted a White knight rescue, but Ionica has been in trouble for a long time."
Ionica has set up a help line for customers. Price Waterhouse Coopers and Ernst & Young have been appointed as joint Administrators.