BT heads for November demerger

British Telecom has said it will demerge its wireless division in November.

The flotation of BT Wireless, which includes UK mobile phone operator BT Cellnet, is part of BT's plans to cut bulging debt, separate faster and slower growth businesses and revive the fortunes of the company's share price.

Analysts estimate the demerged business will be worth about £15bn, comfortably assuring it of a place in the FTSE 100 index of the UK's leading companies.

The date set for BT Wireless's stock market debut is to be formally announced on Wednesday at a presentation to City analysts. BT declined to say whether it had pencilled in 19 November for the demerger, as reported by the Independent on Sunday.

How much debt?

BT Wireless will also be renamed to distance it from its parent group although BT might delay announcement of the new corporate identity until some time after the analyst meeting, analysts said.

A spokesman for BT on Sunday said the company had yet to decide how much debt the demerged business would take on.

"We will demerge with between nought and £2bn of debt. The figure has not been decided," he said.

The Sunday Times newspaper had said BT Wireless would assume less than £1bn of its parent's debt while the Independent on Sunday said the figure would be nearer £2bn.

The Independent on Sunday said BT was seeking a "BBB" credit rating for the division.

Limited life?

Many analysts believe BT Wireless - which also has interests in Germany, the Netherlands and Ireland - has a limited lifespan as an independent company and will need to join forces with a rival in order to compete effectively in European markets.

"A lot of people think mobile is very much a scale game and therefore most are looking for it to be an acquisition target," said SG Securities analyst Steve Trowbridge.

Candidates for a tie-up include Telecom Italia Mobile, Spain's Telefonica Moviles and KPN Mobile of the Netherlands, whose parent company last week failed to agree merger terms with Belgium's Belgacom.

BT shares closed on Friday at 422p. This compared with last year's high of 1,278p.

BT shareholders will automatically receive shares in the demerged BT Wireless as well.