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Tuesday, 23 October, 2001, 13:15 GMT 14:15 UK
BT approves mobiles spin-off
O2 logo
BT's plans for O2 have not been a hit with unions
Shareholders have decided to give their blessing to British Telecom's plans to spin off its mobile phone unit.

MMO2
16.9m customers
15,000 staff
3G licences in Germany, UK and the Netherlands
At an extraordinary general meeting held in Birmingham, 4.297 billion BT shares were voted in favour of the demerger, and 0.67 million against.

"We are happy to receive overwhelming shareholder support for this," said Mike Bartlett, a BT spokesman.

The result squashes a protest by workers and the Communication Workers Union (CWU) who believe that the spin-off would lead to a takeover and then redundancies.

The 400 or so shareholders arriving at the extraordinary general meeting in Birmingham were greeted by a demonstration from the Communication Workers Union (CWU).

But most big institutional investors - who together own more than 80% of BT - had already given their thumbs up to the deal.

BT has 1.7 million private shareholders who hold about 13% of the company's stock.

Takeover fears

Under the plans, BT will demerge MMO2, formerly known as BT Wireless, and float it as a separate business on the stock exchange.

The decision is part of BT's plan to reduce its crippling debts and improve business and share price performance.

MMO2 brands
UK's BT Cellnet
Germany's Viag Interkom
Dutch Telfort
Ireland's Esat Digifone
Isle of Man's Manx Telecom
Europe's Genie mobile internet business
But the CWU, and some analysts, fear the company's restructuring plans are not an improvement on the existing model.

"Crazy though it sounds, the union is having to turn to the City to try to save BT's bosses from themselves," said Jeannie Drake, deputy general secretary of the union.

The CWU has been campaigning for months to get BT to halt its plans, touring the country trying to persuade members and other investors to vote against the proposal.

The concern is that MMO2, when floated as an independent company, will become an instant takeover target.

Its value has already been revised down by analysts since the spin-off was first announced.

Some analysts say MMO2 is likely to be worth about 10bn, down from about 16bn, while some others say the company might be worth no more than 6bn.

Small debts

Corporate investors have already had to weigh up the pros and cons of creating a separate mobile phone unit.

On the plus side, MMO2 has been handed only 500m of BT's total debt, which was viewed by analysts as a relatively modest figure.

But earlier this month, a disappointing set of subscriber figures cast doubt over the popularity of BT's existing Cellnet brand.

The new firm will also inherit third-generation mobile phone licences in the UK, Germany and the Netherlands.

Great uncertainty

The demand for 3G phones - which offer a range of internet services through a mobile handset - is one of the greatest uncertainties facing the telecoms market at present.

Some analysts have also criticised BT for spending heavily on the licences but achieving only modest European coverage compared with rivals Vodafone and Orange.

If the spin-off is approved, investors will be able to begin trading in MMO2 shares on 19 November.

All those who owned BT shares on a specified date will receive an equal number of MMO2 shares.

The company still needs to win court approval on 14 November, but this is considered to be a formality. dealing

See also:

23 Oct 01 | Business
MMO2: A risky investment?
23 Oct 01 | England
'Selling off the family silver'
24 Sep 01 | Business
BT chiefs mull total split-up
22 Oct 01 | Business
BT eyes Post Office vans
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
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