BT to get the go-ahead to take full control of Cellnet

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The Department of Trade and Industry is poised to give British Telecom the go-ahead to take full control of Cellnet, the UK's second largest mobile phone network in which it has a 60 per cent stake. But as Chris Godsmark, Business Correspondent, reports, BT's current intentions towards Cellnet could be more cautious than in previous years.

Since its launch alongside arch-rival Vodafone in 1985, Cellnet has been owned by BT and Securicor, which has a 40 per cent stake in the mobile operator. A previous attempt by BT to buy out Securicor in 1995 was blocked by Michael Heseltine, then President of the Board of Trade, on competition grounds.

Sources close to the DTI said officials had reconsidered the ownership structure of Cellnet and now saw no objections to BT owning the entire network. The department is thought to have changed its view of competition in the UK mobile market since 1995, with the growth of the two all-digital networks, One 2 One and Orange.

Last night Barbara Roche, the minister responsible for telecoms, declined to comment on Cellnet. The existing share structure is enshrined in Cellnet's operating licence, which could not be changed without the consent of the Secretary of state.

The DTI has been informally advised by Oftel, the telecoms watchdog, that it would not oppose the move by BT. Don Cruickshank, the telephones regulator, is thought to have lobbied against the move two years ago, at the height of his battles with BT over market dominance. However, Mr Cruickshank now takes a much more optimistic view of UK competition, with Orange and One 2 One this year accounting for well over half the growth in mobile customers.

He has struck a much more conciliatory tone with BT this year and in a recent speech predicted the group's overall share of the UK market would drop to 50 per cent by 2000. Oftel's latest forecast said BT would control 70 per cent of domestic phone lines by the same date, down from more than 90 per cent today.

The timing of a DTI announcement, which could come early in the new year, would depend on BT's strategy towards Cellnet. Though BT has made no secret of its long-term aim of integrating its fixed phone services with a mobile offering from Cellnet, privately the company has played down an early approach.

In February Sir Peter Bonfield, BT chief executive, said the group would only buy Cellnet in "a good financial deal". Analysts yesterday put a valuation of about pounds 4bn on Cellnet, putting a pounds 1.6bn price tag on Securicor's 40 per cent stake.

Another consideration could be the continuing concern over Cellnet's trading prospects, after a disappointing year in which its growth rate has slowed sharply. By the end of September it had 2.84 million subscribers, below Vodafone's 3.1 million, but its share of overall market growth has slumped this year.

BT has already moved to strengthen its grip over Cellnet's management, appointing Ray Smith, its consumer products manager, as managing director, following the abrupt resignation this year of Howard Ford.

Separately yesterday it emerged that Orange, the newest of the four mobile operators, has claimed victory over Vodafone in the battle to build the biggest network.

Orange now has 3,350 base stations which receive and transmit signals, compared with about 3,200 for Vodafone. The network roll-out is the fruit of Orange's pounds 800m investment programme over the next year.