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Monday, 24 September, 2001, 10:15 GMT 11:15 UK
BT chiefs mull total split-up
O2 logo
The coming of O2 may herald further BT spin-offs
Directors at British Telecom are mulling the fragmentation of the debt-shaken heavyweight into a series of smaller firms.

The demerger of BT's mobile phone business, which will trade as MM02, may be the first of a series of unit spin-offs, documents revealed on Monday.

Company chiefs are considering applying for separate telecoms licences for other units within the BT empire, which is undergoing a shake-up to underpin profitability and lighten a debt load thought at one point to have approached 30bn.

The licence talks "may or may not lead towards further separation of... businesses from each other", BT said in paper detailing the launch of MMO2.

But such a move is unlikely amid the economic turmoil besetting the global economy, the company added.

"In the current market climate, the board remains confident, for the time being, that value can be generated for shareholders without the full or partial listing of any line of business."

Job cuts

The separation of MMO2, a move which still requires shareholder approval, has been proposed amid a regrouping which has seen BT reorganised on a sectoral rather than geographical basis.

Assuming shareholders approve the MMO2 spin-off at the 26 October meeting, BT will be left with four "separately managed" units - BT Retail, BT openworld, BT Wholesale and BT Ignite.

BT said talks were continuing with US-based AT&T over the future of the Concert joint venture, an internationally-focused business which has suffered from heavy competition.

And BT chief executive Sir Peter Bonfield warned of job cuts as the telecoms giants attempted to resolve the crisis at Concert, which has 6,000 staff worldwide, including 1,000 in the UK.

"We have to look at ways of dissolving the partnership in the best way for both sides," Sir Peter said.

"We are expecting quite significant job losses.

"The best way to look at it is that the bulk of the people will continue with the venture, but we took out 500 positions early in the year and we would expect more later in the year."

BT also announced that, after the collapse in the value of telecoms shares worldwide, it would be swallowing a 500m charge.

Swipe at regulators

MMO2 businesses, which include BT Cellnet, Genie and Viag Interkom, made a pre-tax loss of 3.59bn in the year to March, Monday's documents revealed.

But MMO2, whose units boast more than 16 million customers, said it will attempt to prioritise customer service and target executives and young people in an effort to improve its performance.

The business, which will trade as O2, will also focus on German and Dutch markets, where a lack of competitiveness has raised concerns among City analysts.

The rump of BT will look develop broadband services and other internet-related products, an area in which the firm has been criticised by regulators and rival operators.

But, in a swipe to watchdogs, BT said it would also seek to target business and geographic areas "where the current burden of regulation is less severe".

In the City, BT shares stood 20p lower at 353.5p in mid-morning trade.

The BBC's John Moylan
reports on BT's financial problems
See also:

19 Sep 01 | Business
BT loses enquiries monopoly
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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