BT gets go-ahead to bid for Securicor's Cellnet stake
Saturday 30 January 1999
The Department of Trade and Industry said it would lift a restriction preventing BT from increasing its 60 per cent holding in Cellnet, the country's second-largest mobile phone company. The DTI said it would clear the ownership ceiling, imposed 16 years ago to limit BT's dominance of the UK market, provided the phone company did not use its own cash to subsidise Cellnet.
In a second victory for BT, the DTI also announced that the fixed-line operator would be allowed to bid for the new "third generation" of hi- tech mobile phone licenses to be auctioned in the summer.
BT said it had "no immediate plans" to bid for Securicor's 40 per cent stake, but industry experts said the DTI's decision opened the way for a tough round of negotiations over the sale. Securicor said it was not in talks with BT, but added that it was "prepared to consider" the sale of the stake "at a price that fully reflects the value of the investment to its shareholders".
City analysts predicted that the two companies would be locked in a lengthy battle over the price of the stake, which Securicor acquired for just pounds 4m in 1983. They said the final price could range between pounds 2.5bn and pounds 4bn depending on which firm gained the upper hand.
James Ross at ABN Amro said Cellnet, which has 4 million subscribers and is second only to Vodafone in the fast-growing UK mobile market, could be worth up to pounds 12bn. That would make Securicor's stake worth around pounds 4.8bn, although BT is expected to push the price down as it is the only credible buyer.
The lifting of the ownership ban sparked a rally in Securicor shares. The stock soared 12 per cent in early trade before ending 7 per cent up at 631.25p on expectations that the security firm would net a large profit on the sale. BT rose 3.5p to 930.5p.
Industry experts said that, although its 60 per cent stake gives BT management control of Cellnet, chief executive Sir Peter Bonfield would like to have full ownership of the business. They said he needed to strike a deal to respond to the competitive threat posed by the merger between Vodafone and Airtouch of the US.
Some experts believe BT will use yesterday's clearance to bid for third- generation mobile licenses - known as UMTS - as a bargaining chip over Cellnet. The decision effectively enables BT to choose whether to bid for the new hi-tech franchises, which would allow it to feed Internet and video links through mobile phones, on its own or through Cellnet. A BT spokeswoman said the company was still reviewing its options and would not take a decision until the DTI decided on the rules for the auction.
A decision by BT to bid on its own would leave Cellnet stranded as it would prevent the company from offering the new services through its network.
"Reading between the lines, it is pretty obvious that BT is saying: `Unless you do a deal at a decent price, we'll do UMTS on our own,'" a leading telecoms analyst said.
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