Market Report: Analysts predict wave of consolidation in mobile operator sector

It’s still early days for a potential deal between BT and either O2 or EE, but breathless analysts are already predicting a wave of consolidation in the sector.

Sky topped the FTSE 100 yesterday as Bank of America Merrill Lynch played matchmaker with the broadcasting giant. If BT were to ink a deal, Sky will “feel under greater pressure” to buy a mobile operator, the bank thinks.

Alternatively, Sky itself could be a target, with an enlarged BT threatening Vodafone. While Vodafone, down 0.5p at 224.55p, doesn’t need to buy Sky to get into TV, it “may be attracted by its customer base and the potential for cross-selling and cost savings”. Sky climbed 23p to 918p, its rise helped by Goldman Sachs resuming coverage with a bullish 990p target price.

Goldman’s favour also helped ITV add 4.2p to 209.2p, as the investment bank said there was still value despite pressure on ratings, ad share and the ITV studio business.

The blue-chip FTSE 100 index was flat, climbing just 1.35 points to 6,731.14. Supermarkets were on the slide – J Sainsbury fell 10.9p to 241.4p, Wm Morrison lost 5.9p to 181.1p and Tesco dipped 5.25p to 188.15p. Pressure on the sector is “relentless”, according to one trader: “No fund manager wants them on the books for the end of the year.”

Balfour Beatty jumped 13.7p to 176.8p on the mid-cap index as Bank of America Merrill Lynch threw its weight behind the builder. After three profit warnings this year, the bank thinks the only way is up from here, expressing confidence in new chief executive Leo Quinn.

Specialist lender Paragon rose 29p to 406.9p after handing investors an early Christmas present in the form of a £50m share buy-back programme and a 25 per cent divi hike.

And hopes of a bumper Christmas for Mitchells & Butlers sent shares climbing 27.1p to 376.1p. The O’Neills owner reported a 2.4 per cent improvement in trading and said bookings are 5 per cent ahead of last year.

Advanced Computer Software charged up 18.25p to 138p on Aim after receiving a £725m takeover offer from a vehicle controlled by private equity firm Vista Equity Partners.