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The BBC's Rory Cellan-Jones
"Sir Iain Vallance has been blamed by investors for failure to carve out a clear strategy"
 real 56k

Sir Iain Vallance
"This is something I wanted to do for some years"
 real 28k

Sir Christopher Bland
"This is a major opportunity"
 real 28k

Lberal Democrat broadcasting spokesman, Norman Baker
"There are two clear conflicts of interest"
 real 28k

Thursday, 26 April, 2001, 20:45 GMT 21:45 UK
Vallance resigns from BT
Sir Christopher Bland
Sir Christopher Bland is to take over at British Telecom
Sir Iain Vallance has resigned as chairman of British Telecom and will be replaced by Sir Christopher Bland, the chairman of the BBC.

Many investors had been calling for both Sir Iain and chief executive Sir Peter Bonfield to resign, following the plunge of BT's share price by more than 60% during the past 16 months, and the company's massive debt problems.

The news was not met with approval by the financial markets, though.

BT's share price at first rose sharply, only to fall back again in later trading. The shares closed down 30p at 550p.

One reason for the slide in the share price were reports that Sir Iain's resignation had paved the way for a "rights issue", worth a record-breaking 5bn ($7.2bn), according to the news agency Reuters.

This means that BT will issue new shares and use the money to cuts its staggering debt burden.

Analysts also expect the company to cut the dividend it pays out to shareholders. Both moves are certain to drive down the value of BT shares.

Click here to see the development of BT's share price during the past year.

Vallance as 'president emeritus'

The surprise announcement came in the morning on BBC Radio 4's Today programme.

"I will resign from the board," Sir Iain confirmed, although he stressed that he would not leave BT completely - the company has offered him a role as "president emeritus".

"With all the media stuff, I was thinking to myself it's something I've wanted to do for some years and by staying on as president emeritus my experience will be available to Sir Christopher."

Sir Iain will step down on 1 May after 12 years in the role and after a 35-year career with the company.

He was due to depart in July 2002 and attention will now turn to how long chief executive Sir Peter Bonfield will remain at the helm.

Asked if he would keep Sir Peter as chief executive, Sir Christopher Bland said "the relationship is something we'll have to work at".

Sir Iain Vallance
Sir Iain Vallance had been under pressure to resign.
Sir Christopher told BBC News Online that he was very sorry to be leaving the BBC after having a "terrific" time, but that he was looking forward to dealing with the challenges facing the UK's largest telecoms company.

Sir Iain's resignation follows a board meeting on Tuesday, where the company was again considering its options for tackling its debt crisis.

BT's troubles

Sir Iain's departure from BT comes as the company struggles to cope with a 30bn debt mountain.

Its financial difficulties partly stem from spending 10bn on acquiring next generation mobile phone licences in the UK and Germany.

BT has promised shareholders to wipe 10bn off its debt by the end of this year - and needs to do so quickly in order to satisfy credit rating agencies.

The detail of how the company intends to reduce its debt will be revealed when it reports its annual results on 17 May.

Investor revolt

With the telecoms sector under increasing pressure, the state of BT's balance sheet has become the overriding concern for investors.

And weary BT shareholders have seen the company's share price slump from a peak of 15.13 last year to just 5.80 at the start of trading on Thursday.

BT's troubles are not all home grown. The company's fall from grace has coincided with wider stock market gloom, which saw leading shares in the US and the UK fall heavily since March 2000.

Amongst the hardest hit have been former state phone monopolies who, in virtually every western European country, have seen similar plunges to BT in their share prices.

Conflict of interest

Sir Christopher is the current chairman of the BBC board of governors and will continue in this role until a suitable replacement can be found.

Sir Christopher said there would be no conflict of interest between the jobs.

As BBC chairman he said he had no influence on the corporation's journalistic output and would continue to guarantee editorial independence.

UK Prime Minister Tony Blair and Culture Secretary Chris Smith are reported to be happy with Sir Christopher continuing his role at the BBC when he takes up the BT appointment.

The government on Wednesday appointed Sir Iain as a deputy chairman of the Financial Reporting Council.

Sir Iain is also the current president of the Confederation of British Industry.

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