Wall St. adds to Europe's gloom

LONDON, England (Reuters) -- Heavy selling in European mobile phone operators and a widespread retreat in technology and media shares kept stock markets well under water on Thursday, with a weaker Wall Street adding to the gloom.

Vodafone Group led the retreat in mobile phone operators across Europe, the UK company's stock falling nearly five percent to four-year lows amid worries about future revenue growth.

The industry has failed to deliver properly on its 3G next-generation Internet-linked mobile phone promises.

Once the top global mobile phone operator, Vodafone has now been pushed down the pecking order in terms of market capitalisation after its recent rout.

The media sector slid on continued selling in Vivendi Universal which also hit fresh multi-year lows on concerns about its ability to sell some assets to cut debt.

At 1404 GMT, the FTSE Eurotop 300 index was 0.66 percent weaker, with declining issues outpacing advancers by nearly two to one.

The narrower Euro Stoxx 50 index had shed 0.7 percent. European indices are trapped in their four-month old trading range.

On Wall Street, the Dow Jones industrial average was off 0.22 percent at 10,358 points, while the tech-heavy Nasdaq Composite had dropped 0.4 percent.

The DJ Stoxx European telecoms sector sank 3.3 percent to its lowest level since September 2001.

"The weakness in telecoms is a bit of a surprise," said Clive McDonnell, European strategist at Standard & Poor's.

Some firms like Deutsche Telekom and France Telecom were likely to be losers from global index compiler MSCI's review to be unveiled on Thursday evening,

McDonnell said.

Companies that have large government holdings will lose out in MSCI's final-phase shift to free-float weightings in its indices.

"That, in combination with average revenue per user (ARPU) numbers coming from Vodafone on April 25 is getting people worried," McDonnell said.

Deutsche Telekom fell 2.5 percent, BT Group fell 4.2 percent, Orange shed five percent, and mmO2 tumbled 7.7 percent.

Telecom Italia Mobile shed 2.5 percent.

Companies that supply equipment to mobile phone operators and others in the telecom sector were also hammered, with Alcatel down five percent after JP Morgan bank said it was concerned about the French group's guidance for 2002.

"Valuations still look high across the board, with telecoms and technology stocks looking most vulnerable going into the reporting season as the visibility and hence reliability of their earnings stream looks doubtful," said Lodewijk van der Kroft, a fund manager at Theodor Gilissen Bank in Amsterdam.

The European and U.S. quarterly earnings season is slowly getting under way, with mobile phone maker Nokia due to report next week.

There is also a general shift in the market away from the technology, media and telecoms sector to economy-sensitive cyclicals as investors bank on recovery to boost profits in those sectors, analysts said.

Among the day's few bright spots, European aerospace group EADS rose 3.7 percent in Paris. EADS said it will deliver 300 Airbus plans this year and at

best 300 in 2003, and that it hoped to match rival Boeing's commercial plane sales in 2005-06.

The stock was also upgraded by a French broker.