BT could take £500m writedown over Concert

British Telecommunications yesterday warned it could incur "substantial" restructuring costs if its Concert joint venture is unwound and indicated it will have to take a £500m charge to cover the decline in value of some of its other investments.

The group said £350m of its £500m writedown related to its 9 per cent stake in AT&T Canada, with the balance coming from a variety of other assets including a 20 per cent holding in Argentina's Impsat.

Furthermore it said it could be forced to buy an extra 21 per cent stake in AT&T Canada, which would cost a maximum of 1.65 Canadian dollars (£720m). It also revealed that its pension fund was facing a higher-than-expected deficit of £1.6bn.

Concert is a loss-making 50/50 tie-up between BT and AT&T which provides long- distance telecoms services to business customers. BT said it was continuing to hold discussions with AT&T over the venture's future but said the possibility of injecting its Ignite unit, its UK data business, into the venture had now been ruled out. At the end of June, BT attributed a £1.4bn value to Concert in its balance sheet.

Analysts were taken aback by both the size of the £500m writedown and the lack of progress at Concert. Neil Juggins, an analyst at BNP Paribas, said: "The big concern out of this is if they can manage to get a £500m charge out of comparatively small assets, what more is in store?."

The financial blows were dealt as both BT Group and mmO2, its mobile phone arm, published their listing particulars in preparation for the demerger of mmO2. BT shareholders will receive one mmO2 share and one BT Group share for each BT share they currently hold. BT must shoulder the bulk of the £84m demerger costs.

When the demerger is completed, expected on 19 November, BT will be free to offer its customers mobile products and services under the BT brand as long as they are co-branded with that of other mobile phone operators. It will not be able to offer mobile products and services in the UK under the BT brand alone until March 2003.

mmO2, which analysts value at between £8bn and £15bn, reiterated its plans to spend £8.3bn over the next five years, mainly on building third generation phone networks and enhancing existing networks.

Peter Erskine, chief executive, said costs would be tightly controlled although that would not necessarily mean job losses among its 15,000 strong workforce. The company would be keen to tie up further network sharing to save money.

"We've put in place a credit facility which allows us, in the first two years, to borrow up to £3.5bn. That's all available and that's the maximum we'll need to deliver our plans," he said.