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Monday, 13 November, 2000, 11:54 GMT
BT sale as Swiss halt auction
British Telecom is selling off its mobile phone operations in Switzerland, just as the country's auction of next generation mobile phone licences was due to get underway.
BT said it had reached a definitive agreement to sell its 34% stake in Sunrise Communications for £460m in cash.
The buyer is TeleDanmark, which was already one of Sunrise's major shareholders.
The news came as Swiss telecoms authorities postponed an auction of next generation mobile phone licences after reports that Sunrise was joining forces with another prospective bidder, leaving four groups in the race for four licences and effectively ending the auction before it had begun.
Business market focus
Analysts said BT's move was part of a wider strategy to target investment in third-generation mobile operations at markets where the firm already has a 2G presence.
Installing the necessary infrastructure and building market share in a new market risked being prohibitively expensive, they said.
BT said it was realising £390m on its Sunrise investment after three years.
A BT spokesperson said: "We had an opportunity to sell our stake at an attractive price, at a time when we want to consolidate our operations and focus on the high-growth business market in Switzerland."
BT's Swiss operations will now focus on corporate broadband business under its broadband division BT Ignite.
The company's disposals strategy is aimed at reducing debt by about £10bn by the end of next year from a projected £30bn.
Debts have been pushed up sharply partly because of the cost of acquiring new mobile licences in the UK and Germany.
Since the UK and German licence auctions, BT has appeared reluctant to pay the prices necessary to win new European mobile licences.
In Italy, partners in the Blu consortium had pressed BT to raise its stake but the UK firm declined and Blu quit the auction after two days of bidding.
Although Blu is an existing operator in Italy, analysts said it would struggle to increase market share in a mature market dominated by Telecom Italia and a Vodafone-led group.
Earlier this month, BT reported a 47% fall in second-quarter pre-tax profits to £471m and announced a wide-ranging corporate restructuring to include flotation of its wireless division.
The story of European mobile licence auctions this year has been one of widely varying fortunes, with sales in Germany and the UK raising billions of dollars more than expected but auctions in Italy, the Netherlands and Austria falling flat.
The Swiss authorities had been expecting 10 bidders to line up for the auction but this number was reduced to five last week.
In the latest twist, TeleDanmark, whose Sunrise stake is to rise to 89%, on Monday said it planned to buy 70% of diAx - a consortium led by SBC Communications of the US.
Under the deal, TeleDanmark - itself 42% owned by SBC - will acquire SBC's 40% stake in diAx as well as a further 30% of diAx from its other shareholders - all Swiss power or financial services providers.
Sunrise, whose shareholders also include SBB Swiss railways and the investment bank UBS, will then be merged into the restructured diAx.
The auction of the mobile licences had been due to get underway at 0800 GMT.
The other likely bidders were Spain's Telefonica, a consortium of Swisscom and Vodafone, and a France Telecom/Orange group.
The minimum price for the licences had been set at 50m Swiss francs each ($24.56m), far less than the 2.5bn Swiss francs that had been expected several months ago.
The Swiss authorites said they were postponing the auction because of the recent changes in ownership structure among bidding groups.
"Virtually all candidates have undergone major changes in structure and ownership in the last few days. This may affect the competition framework today and in the future on the Swiss market," the Swiss federal telecoms authority Bakom said in a statement.
The options now open to the authorities are to reschedule the current auction for early next year, call a new auction (allowing fresh bidders to come forward) or abandon the auction entirely and award the licences on a fixed fee basis.
Some of the prospective bidders on Monday said they would consider legal action if Switzerland moved to call a new auction.
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