BT to counter 'hysterical' speculation with early announcement of reforms

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The Independent Online

British Telecom is bringing forward the announcement of radical restructuring plans in an effort to counter what directors see as increasingly "hysterical" press and City speculation over the company's future and the position of its chairman, Sir Iain Vallance.

British Telecom is bringing forward the announcement of radical restructuring plans in an effort to counter what directors see as increasingly "hysterical" press and City speculation over the company's future and the position of its chairman, Sir Iain Vallance.

The outcome of BT's yearlong strategic review was due to have been announced in December or early next year, but under growing pressure in the City, the company is now expected to unveil its grand plan either with the interim results on 9 November or sooner.

One senior BT executive said; "We have been accused of foot-dragging over the strategic review, but these are very radical changes that are being considered. We cannot afford to be reckless with the company's future, and we have to get it right."

In a straw poll last week, a number of big fund management groups said that although Sir Iain had outstayed his welcome and should have retired earlier, there was no immediate pressure for his head. "We are reserving judgement until we have seen the outcome of the strategic review", one fund manager said.

Most saw last week's appointment of a new finance director, Philip Hampton - well respected in the City for his handling of the British Gas breakup - as "a very positive step", and for the time being seemed prepared to give Sir Iain the benefit of the doubt.

There was dismay in some parts of BT over an apparent attempt by Lord Marshall, the deputy chairman, to canvass City opinion late last week on appetite for "a sacrificial change at the top".

One source said; "He must have known it would get out. The man's either a fool or he's deliberately trying further to destabilise the situation. He's made it look as if the board is in disarray, so it is no wonder there is so much speculation". Lord Marshall is due to be replaced next year by Anthony Greener, a former chairman of Diageo.

Rapidly escalating levels of debt, intense competition, and a sudden reversal in investment sentiment towards the telecoms sector, have reinforced the urgency of the review, which is expected to include an enhanced programme of spin offs and disposals.

The review will detail proposals to reduce group endebtedness by at least a third - or around £10bn - and could involve plans for demerging the core regulated network from the rest of the business.

Most of BT's revenue still comes from local and long distance networks, the part of the business which is under most pressure. BT is determined to demonstrate the growing value of its other businesses in mobile telephony and the internet.

It is thought certain that as part of the review BT will attempt to float its wireless interests under the Cellnet name, though with France Telecom due to refloat Orange later this year and growing investor concern over the cost of mobile licences, this is not going to be as easy as it was.

The option of a more general merger of business services with those of AT&T, which is under similar pressure to BT in the United States, is also high on the agenda.

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