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Thursday, 26 April, 2001, 10:57 GMT 11:57 UK
Can Bland revive BT?
BT workers cleaning phone boxes
Cleaning up: BT needs to sort its finances out to regain investor confidence
Is the appointment of Sir Christopher Bland a turning point for BT?

Markets may have welcomed the departure of Sir Iain Vallance from the helm of the troubled telecoms company but the jury is still out on his replacement Sir Christopher Bland.

Sir Christopher faces the same problems as Sir Iain - how to reduce the company's mounting debt burden.

Views are mixed as to whether the new man will have the power to force through the necessary change, or whether he will preside over a superficial upheaval, which will fail to address the deeper malaise at the company.

BT's problems?

BT shareholders and management must shake their heads and wonder where it all started to go wrong.

Stiff competition in the telecoms market, the huge cost of paying for third-generation (3G) mobile phone licences, pressure from the industry regulator Oftel to lower its prices, have all been given as reasons why BT is in such crisis.

On top of that, last year BT became everyone's favourite whipping boy for the slow roll-out of high-speed internet services in the UK.

Sir Iain Vallance and Sir Peter Bonfield have become indelibly linked with the company's crisis and indeed the company's difficulty in raising money has been attributed to the market's lack of faith in its management.

Many say Sir Christopher's first move could be to get rid of Sir Peter, though he is, at this early stage, standing by him.

Raising cash

Many analysts perceive Sir Iain's departure as a precursor to a rights issue - selling as much as 5bn worth of shares to raise money to pay off its debt.

While in the longer term, this will cut the debt and boost the company's credit rating, in the short term, shareholders could see the value of their investments plummet.

Its other options for raising money include cutting its dividend - possibly when its results are published on 19 May - selling assets or demerging assets and putting some of the debts in these demerged assets.

The assets it could sell include a 17% stake in Spain's Airtel, a stake in a French mobile telephone company, as well as its stake in Japan Telecom. In all cases, Vodafone is a likely buyer and it is uncertain how much BT could actually get for the sale.

"This depends on market conditions, the market is the same today as it was yesterday," Paul Mount, telecoms analyst at Nomura said, sceptical about the positive effect of Sir Christopher.

Ultimately, these choices are exactly the same as those which faced Sir Iain Vallance, but the hope is that Sir Christopher will push at least some of them through.

"He has nothing to lose," Mark Davis, telecoms analyst at West LB Panmure said.

He points to Philip Hampton - who replaced Robert Brace as finance director, late last year - and says the time is right for both of them to push through radical changes.

"BT needs someone who will come in, take a look and make decisions....There is still a lot that needs to be done, a lot of efficiencies, a lot of cost cutting," added Davis.

"Essentially BT has some great assets. It has the potential to come back and be a serious competitor in the telecoms market, albeit a smaller one," he added.

Low calibre

But in some quarters his appointment is seen as indicative of the company's failure to attract a high-calibre candidate from the telecoms industry to run the company.

Sir Christopher could move to strengthen the board by including more heavyweight directors, Societe Generale's head of European telecoms research Jim McCafferty said.

"It is quite unique in the way it structures the board. There are only two executive directors on the board, other telecom companies have four or five," he said.

Indeed, he expects any rights issue to be accompanied by news of a further management reshuffle.

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