Government puts 150p tag on BT sale: Incentives less generous as details of first share instalment are set out

THE Government has set a minimum initial payment of pounds 180 for private investors in the pounds 5bn sale of shares in British Telecommunications, scheduled for mid-July. The first instalment for the UK public offer is 150p per share and the minimum application is for 120 shares.

The full share price, payable in three instalments spread over 15 months, will be set through bidding for shares by financial institutions. Private investors, who must pre-register for shares, will be offered a discount on the first instalment, compared with the price paid by institutions, but its size will not be revealed until 29 June.

The public will also receive a discount of 10p on the second and third instalments, or a one-for-15 share bonus if they hold the shares for three years.

BT's final dividend of 9.45p per share for the 1992/93 year will be payable on the partly paid shares. BT's interim dividend for the current year - to be announced next February - will be paid to new shareholders who meet the second 140p instalment in March.

The incentive package is less generous than that offered for the last sale of BT shares in 1991, which the Treasury said will save pounds 50m. In the previous sale the incentive was a 15p discount on the second and third payments, or a bonus share for every 10 held for three years.

The Government's advisers believe that the drop in building society interest rates - considered the main competition for small investors' funds - lessens the need for strong incentives. High street interest rates have fallen from 9.5 per cent to 4.5 per cent over that time.

Stephen Dorrell, Financial Secretary to the Treasury, said that the package was designed to maximise proceeds for the taxpayer but at the same time to pursue the Government's goal of wider and deeper share ownership.

Those registering through share shops in the high street - run mainly by banks, building societies and stockbrokers - rather than through the Share Information Office will be most favoured when shares are allocated should the offer be heavily subscribed. BT's 170,000 employees are guaranteed a minimum of 2,000 shares.

The Government expects the UK public offer to account for at least half of the shares in the sale. In addition, private investors can bid for larger amounts of shares through a retail tender that forms part of the international share sale to institutions. Shares bought through the tender do not carry incentives.

Those using the tender route must apply for a minimum of 2,000 shares unless the application is for shares to invest in a personal equity plan. In that case the minimum is 1,000 shares.

The deadline for applications is 10am on 14 July and dealings in the shares begin on 19 July.

Around 1.8 million potential new shareholders have registered for the sale in addition to 2.4 million existing shareholders and employees who are automatically registered. However, only 700,000 of the newcomers have opted to use share shops, which were to be a big feature of the sale.

Mr Dorrell rejected criticism from some share shops that not enough has been done to promote their use as part of the marketing campaign. 'I believe that share shops are understating their own success,' he said.

Mr Dorrell also defended the advertising campaign featuring Mel Smith as Inspector Morose, which critics say has had little impact. 'The ads are a novel way of presenting a message which is no longer as novel as it once was,' he said.

Marketing to institutions worldwide began in earnest last week. Eleven global manager banks led by bank SG Warburg have been appointed to market exclusively to 500 large institutions, and meetings are being held this week in New York and Tokyo.

Institutions have been warned that those who prove to be net sellers of already-traded BT shares in the run-up to the new offer will suffer when it comes to share allocations, while net buyers will be favoured. A spokesman for SG Warburg said: 'We are not forcing anyone to do anything. We have just added a new allocation criterion and thought we had better tell people up front.'