BT hires demerger specialist

Sir Christopher Bland: has overseen changes at BT

British Telecom has hired corporate restructuring expert David Varney to oversee the long-awaited demerger of its mobile phone arm, BT Wireless.

Mr Varney, who steered British Gas through its split into BG and Lattice in 1999, has been appointed chairman of the division in the latest shake-up at BT since Sir Christopher Bland took power last month.

David Varney: "Stakes are high"

The spin-off of BT Wireless, which includes UK operator BT Cellnet, Viag Interkom in Germany and Telfort in The Netherlands, will see the firm listed alongside BT on the London Stock Exchange.

The move is designed to boost the performance of BT operations, struggling under a debt mountain thought to have reached £30bn.

BT also revealed on Wednesday that it has agreed the sale of its UK property portfolio for £2.3bn to Telereal Holdings, a joint operation backed by real estate giant Land Securities.

The announcements were welcomed by investors, which sent BT shares up more than 3%.

At 1200 GMT, the shares stood at 448.25p, up 14.75p on the day.

'Flexible firm'

Mr Varney, who left BG last year following its demerger, said he envisioned an independent BT Wireless as a "flexible, nimble organisation, alert to opportunities".

"The stakes are high in the mobile market," he said. "Establishing the new company and building on its business success are challenges that I relish."

Mr Varney is thought earlier this year to have declined the chairmanship of Railtrack, currently one of the most difficult posts in UK business.

At BT Wireless, Mr Varney will face difficulties of building investor enthusiasm for a telecoms firm amid a downturn in the sector, prompted largely by the level of debt incurred buying licences for next-generation mobile phones.

While BT is rumoured to have looked at alternative ways of spinning off BT Wireless, Mr Varney's statement indicated that a straight demerger was still the favoured option.

Mr Varney said he looked forward to the creation of a "new, major company" listed on the FTSE100 index of leading UK shares.

'Landmark deal'

The property deal, involving 7,500 properties encompassing more than 6 million square metres of space, was welcomed as a "landmark transaction" by Manish Chaude, chief executive of Land Securities' Trillium subsidiary.

The agreement will allow BT to retain freehold control over about 5,250 of the buildings, which it needs for day-to-day operations.

BT will rent these buildings from Telereal, in a so-called "sale and lease back" arrangement similar to that used in the funding of, for example, hospital construction projects.

"This... transaction illustrates the increasing realisation among companies of the value that can be unlocked from their property assets," Mr Chaude said.

For BT, Sir Christopher, chairman since May, said: "This represents a further step forward in BT's drive for cash and the reduction of headline debt."

The deal is dependent on Telereal gaining funds through a bond issue, Wednesday's statement said.