BT rolls back share terms

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BT will tomorrow announce a price - expected to be between 140p and 150p - for the first payment on its pounds 5bn share issue in July. BT shares already traded on the stock market closed at 413p on Friday.

The company will also announce a substantial reduction in the incentive package offered to private investors on the second and third payments, compared with those offered on the previous BT share sale 18 months ago. The incentives include money off the price of the second and third instalments, or bonus shares if people hold on to their investment for a set period.

The smaller incentive package will reflect the fall in interest paid on building society savings accounts, which government advisers believe is the natural alternative for many small investors. At the time of the previous BT share sale in 1991, the interest paid on building society accounts was around 10 per cent. It has now fallen to around 4.5 per cent.

So that BT shares promised a similar yield to building societies in 1991, investors were offered an 8.5 per cent discount, or 15p, off the issue price. They were also offered an alternative of one share for every 10 bought, if the shares were held for three years. However, the discount is likely to be only 4 or 5 per cent this time.

Private investors will not know the full price of the BT shares on offer until institutional investors have put in their bids by mid-July. As with previous BT issues, private investors will pay a lower price than the institutions for the first instalment.

So far, 1 million potential new BT investors have registered to buy shares. Of these, only about one-third have opted to register with the share shops run by stockbrokers, building societies and banks, where they will get preferential allocations on shares should demand be heavy.

The sale received a boost earlier this week when the new industry regulator, Don Cruickshank, ruled out a break-up of the company. However, he did herald a further period of tough regulation for BT, demanding accounting separation of its retail and wholesale businesses and an extension of his powers to secure a better deal for rival operators that want to use BT's wires.