BT defies calls to clarify position on AT&T

BT refused to make a statement about its future yesterday, amid speculation that it would be asked by the Stock Exchange to confirm its senior management is in merger talks with America's AT&T.

BT refused to make a statement about its future yesterday, amid speculation that it would be asked by the Stock Exchange to confirm its senior management is in merger talks with America's AT&T.

Britain's largest telephone company is under mounting pressure to issue an announcement after reports that the two companies are preparing to combine their mobile phone operations and their business services divisions, possibly creating two separate stand-alone companies.

However, yesterday BT adamantly refused to say whether it would officially clarify its position to the market this week. It would not confirm or deny whether merger talks with AT&T had taken place.

Confirming the talks could be perilous for BT, as a positive market reaction would be important in order to fend off hostile bids and to try to stem the downwards trend in its share price.

BT shares have already fallen by 50 per cent since the start of the year and on Friday they dropped another 28p to 795p.

Yesterday a BT spokesperson said: "AT&T are very important to our global strategy and we talk to them all the time."

However, insiders said that BT's chief executive Sir Peter Bonfield and chairman Sir Iain Vallance, as well as finance director Robert Brace, met AT&T's chief executive Michael Armstrong and several senior executives 10 days ago in a hotel near Heathrow Airport.

AT&T, based in New York, also refused to comment. Its board of directors is due to meet this week in New York and is expected to consider what role BT will play in its future.

The negotiations, still thought to be at an early stage, involve both companies' largest divisions. In the first six months of the year business customers accounted for $14bn (£9.84bn) of AT&T's $32bn revenues.

Sir Peter Bonfield has said that he is "open minded" about a tie-up with AT&T, which is worth £85bn, but a full merger is likely to fall foul of regulators, making a move to merge parts of the businesses more realistic.

BT, which is valued at £52bn, already has a joint venture with AT&T called Concert. The venture, which was set up at the beginning of the year, sells telephone and internet services to multi-national businesses and is earmarked for a flotation.

The City has been expecting a fresh announcement of some kind since BT declared that cutting its £30bn of debt is a priority. AT&T, which has also seen its share price plunge this year by 37 per cent, also wants to cut debt and increase investors' confidence.

A merger of the two companies' business services and wireless divisions could alternatively be merged into Concert, creating a company focused on the international market for internet and data services, leaving BT and AT&T with a more domestic focus.