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Tuesday, 18 September, 2001, 17:34 GMT 18:34 UK
Analysts mixed over BT spin-off outlook
O2 logo
O2: Development will be backed by 3.5bn loan
The launch of British Telecom offshoot MMO2 is set to receive a cautious welcome on bond markets, after analysts gave the firm a credit rating one notch above junk grade.

The ratings agency Standard & Poor's cited concerns over MMO2's position in continental European markets as well as the potential for third-generation (3G) technology, for its decision to assign the firm a low long-term rating.

There was concern MMO2 would not be able to borrow to finance its expansion

UK equity trader

S&P rivals Moody's was more upbeat about MMO2's prospects but also raised concerns over the mobile phone operator's competitive position in Germany and the Netherlands.

The news came as BT chiefs announced that MMO2 had taken out a 3.5bn loan to cover "general corporate needs", and its development as an independent, which will trade as O2.

News of the loan prompted a surge in BT shares, which closed 22p higher at 398.5p on Tuesday.

"There was concern [MMO2] would not be able to borrow to finance its expansion," one equity trader said.

"Now with this facility it will make life a lot easier."

Tokyo cancellation

BT chiefs also revealed pm Tuesday that BT is to cancel its listing on the Tokyo Stock Exchange ahead of the launch of MMO2, currently operating as BT Wireless, scheduled for 19 November.

The move will be interpreted as a further signal of BT's retreat towards regional operations, as the telecoms giant regroups in an effort to revive profitability and reduce debt said to have approached 30bn.

But both BT and MMO2 will be traded on London and New York stock exchanges, a statement on Tuesday said.

'Strong presence'

MM02 has, through in-house technology and alliances with other firms, built a "strong presence" in the mobile data market, BT said.

And Moody's, which is more upbeat about MMO2's UK standing and its management strategy, has awarded the operator a higher credit rating.

"The split credit rating is the result of different views about the market for 3G services and the ability of MMO2 to manage the execution risks it faces," BT said.

BT shareholders are due to meet on 23 October to formally approve the firm's split.

See also:

05 Sep 01 | Business
Mall disputes BT name change
03 Sep 01 | Business
BT unveils new mobile brand
02 Sep 01 | Business
BT heads for November demerger
27 Aug 01 | Business
BT Wireless 'to axe 1,500 jobs'
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