Britain's leading share index fell back on Monday as investors locked in gains in the mining sector and as pay-TV firm BSkyB slipped on concerns a tie-up between Virgin Mobile and NTL would increase the battle for subscribers.
But shares in Virgin Mobile rallied about 10 percent to 342-1/2 pence after NTL offered to pay 817 million pounds ($1.4 billion) for the UK firm, aiming to create a TV, Internet, fixed-line and mobile phone powerhouse under Richard Branson's Virgin brand.Robert Parkes, a strategist at HSBC Securities, said the fact that a foreign buyer had come in to snap up a British firm was supportive for the market.
"Usually when a domestic buyer announces a take-over what you tend to see is the shares coming off. The fact there have been foreign and private equity buyers for UK companies has been a key positive driver for the market.
But shares in BSkyB fell 2.8 percent to rank as the blue chip index's top fallers after news of the bid for Virgin raised concerns about increasing sector competition. Telecoms firm BT Group dipped 0.7 percent.
"We envisage an expensive battle for subscribers over the next two to three years between a number of players including Sky, NTL, BT and other entrants to the market," analysts at Panmure Gordon said.
The FTSE 100 share index closed down 17.7 points, or 0.3 percent, at 5,510.4 - easing after strong gains in the previous two sessions.
A recovery in shares in Vodafone helped the blue chip index creep off an earlier low at 5,498.3. The mobile phone giant's stock topped the list of blue chip risers with a 1.6 percent gain to 124-3/4 pence as news of the appointment of HSBC's outgoing chairman as its new chairman offered support to the stock.
"This has largely been leaked, but it's still encouraging," said a dealer. "It seems there have been issues over external communications at Vodafone. HSBC are very good at communicating so it looks like a good move."
Shares in Vodafone, which have been pressured in recent weeks by concerns over its Japanese arm, were down earlier following a downgrade from investment bank WestLB.
Shares in utility Centrica dipped 1.4 percent, having reached a session low at 228-1/2p after the Chancellor of the Exchequer Gordon Brown said in his pre-budget report he will raise the supplementary North Sea charge to 20 percent from 10 percent.
"It has been largely tracked that something on the North Sea charge would be announced, but as always, the reality of it is unhelpful to the stock," said a trader.
On the upside shares in sugar firm Tate & Lyle were among the top blue chip gainers, adding 1.3 percent after its plan to buy two food ingredients makers pleased analysts, who said the deal should be earnings enhancing.
Clothing retailer Next added 1.5 percent, while health and beauty firm Boots gained 0.8 percent. Dealers said there was growing optimism that UK retailers would have a respectable Christmas trading period.
Among FTSE 250 movers, Pendragon added 7.1 percent as it agreed a 450-million-pound merger with smaller rival Reg Vardy, giving it economies of scale to cope with difficult trading conditions.
Michael Page shares rose 2.8 percent as dealers said vague talk of a possible bid for the staffing group from Swiss rival Adecco swirled around the market. Adecco declined to comment. Fellow recruitment group Hays was also up 3 percent.