Hopes of boosted interest in BT sale: Incentives will be less attractive this time

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The Independent Online
THE GOVERNMENT hopes that more potential investors in BT3 - the third issue of BT shares - will show signs of interest in July's pounds 5bn sale after today's announcement of details of the incentive scheme, the share price and the deadline for applications.

Around half of the 1.3 billion shares in the Government's residual stake that are on offer have been reserved for private investors, who will pay up in three instalments over three years.

But Stephen Dorrell, financial secretary to the Treasury, is expected to reveal that only 1.1 million people have registered for information so far. In 1991, at a similar stage in the BT2 float, there had been three million registrations.

S G Warburg, the Government's adviser, points out that the number of those given information on BT3 will be swollen by the 2.4 million existing BT shareholders and employees who qualify automatically for the sale.

The sale was boosted last week when Don Cruickshank, the new industry regulator, ruled out any break-up of the company. Last time round Sir Bryan Carsberg, his predecessor, was held to have deterred investors when he warned of a tough policy on pricing.

Two-thirds of those who have applied contacted the BT3 Share Information Office, even though people going through the 150 banks, building societies or stockbrokers acting as share shops will be given preference in the allocation if demand is heavy.

The parcel of incentives offered by the Government is expected to be less attractive than during BT2, when investors were offered discounts of 8.5 per cent on the issue price when making the second and third instalments, or a one-for-10 share bonus. The discount for BT3 is likely to be only 4 or 5 per cent.

The Treasury points out that the interest available on building societies' savings accounts - seen as the main rival to investment in BT3 - is now around 4.5 per cent.

Mr Dorrell is likely to announce a price of between 140p and 150p a share for the first payment. On Friday BT's shares closed at 413p. But, as with previous BT issues, private investors will have to wait to know the full price of the shares until the institutional investors have put in their bids.