BT faces threat from Virgin

BT faces more threats to its business

British Telecommunications reportedly faces two separate assaults on its fixed-line business from Sir Richard Branson's Virgin and a group of bankers.

Sir Richard told the Independent on Sunday newspaper that he plans to go head-to-head with BT by launching a fixed-line business.

Virgin is already in the mobile phone market with its successful venture Virgin Mobile, which offers branded services using the One2One network.

Richard Branson: 'Virgin will extend into the fixed line telephony market'

Sir Richard described Virgin as a "branded venture capital business" and said that the company will "extend into the fixed line telephony market next year".

Meanwhile, a group of financiers has approached BT with an offer of £8bn ($11.4bn) for the telecom giant's local-loop business, according to the Sunday Times newspaper.

BT's local loop has 5,500 exchanges connecting more than 25 million customers to the BT network, said the newspaper.

Virgin Telecom?

Virgin also hopes to offer customers broadband internet access, reported the Independent.

The company would sell Virgin deals for fixed telephone lines at prices that undercut BT and cable groups, such as Telewest and NTL.

Virgin Mobile has reportedly grown by 50% in the last six months

Virgin plans to buy spare capacity on the phone network to provide the services.

Sir Richard's mobile phone business has grown by more than 50% in the first half the year, said the Independent, citing figures from Continental Research.

It has more than a million subscribers and cost £80m to set up.

Virgin has also inked a deal with the US telecom operator Sprint to launch Virgin Mobile in the US.

Looped-up

The group of bankers bidding to buy BT's local-loop business is led by the US asset-finance house Babcock & Brown and a New York finance boutique called Chancery Lane Capital.

The consortium made a presentation to BT in June, but was rebuffed, reported the Sunday Times.

The deal would see BT rent back lines to service customers

Under the deal - which was also reported in the Sunday Business newspaper - BT would sell the lines to the group and then rent them back.

The new owners would also offer the system to other phone operators or cable companies, said the Sunday Times.

Last month the telecom regulator Oftel ordered BT to allow competitors cheaper access to parts of its telecoms infrastructure.

The ultimatum was issued after watchdogs admitted to concerns over the slow roll-out of high-speed internet networks in the UK.

Debt recovery

Any deal would help BT further reduce its excessive debts.

In company results announced last week, the company said it had managed to slash £10.4bn from its debts of £30bn.

It also unveiled another drop in quarterly earnings, with underlying profits falling to £186m in the three months to 30 June.