Europe's telecoms stocks made a good start to the day after strong operating results from Vodafone and the announcement of debt reduction plans at France Telecom. But the sector shed gains and ended in the red as doubts emerged about Vodafone's growth prospects.

However, France Telecom, which held its a.g.m. yesterday afternoon, stayed in the black and was one of Europe's best blue-chip performers. The shares rose 4.4 per cent to €21.61, although from a low base. They have fallen by half this year alone, while at their peak in 2000 touched €200. The French finance ministry confirmed that it saw no reason for a rights issue at France Telecom. The government still owns 54 per cent of the stock.

France Telecom also confirmed it was near to a deal with its German affiliate MobilCom. The deal would mean France Telecom, which already has €63.4 billion debt, would not have to take on all of the €7 billion debt from MobilCom.

Orange, the mobile operator controlled by France Telecom, rose 3.4 per cent to €6.07 after saying it had reached its financial targets earlier than expected.

Europe's other heavily indebted national operator, Deutsche Telekom, fell again after just one day of gains. The shares were down 1.2 per cent at €12.30 in late trading. The company was also holding its a.g.m. yesterday, although it yielded little positive news.

Deutsche Telekom's internet service provider T-Online was downgraded by UBS Warburg from "hold" to "reduce" on valuation grounds. The shares slipped 0.5 per cent to €10.35. They have traded sideways in the €10-€15 range for the past six months.

Fiat, the troubled Italian motor group, staged a rebound after Monday's 6 per cent tumble, helped by renewed speculation that the company might sell its Fiat Auto arm and that creditor banks would help the group to cut its debt. The shares recouped 2.8 per cent to €13.22.