City investors demand new finance director at BT

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The Independent Online

Institutional investors are calling for BT to bring in a new, hard-hitting finance director to replace Robert Brace, who has been in the job for seven years.

Institutional investors are calling for BT to bring in a new, hard-hitting finance director to replace Robert Brace, who has been in the job for seven years.

The pressure for change has come to a head after BT was forced to pull a $10bn (£6.8bn) bond issue - needed to fund the phone giant's move into the German mobile telecommunications market - because credit rating agencies Moody's and Standard & Poor's said they would downgrade BT's debt.

In the end S&P's bought BT's long-term rating down four notches to A. This was not as bad as had been feared, but could end up costing BT over £100m a year in extra interest payments on its £30bn of debts.

BT shares have been hit hard by the downgrade, closing on Friday at 822p - a little over half their high of 1,513p at the beginning of the year.

Investors are angry that BT is finding it difficult to fund many of the investments it needs to be a world force in telecoms. They feel it has been left behind by other former state-owned phone groups, such as Telefonica, Deutsche Telekom and KPN, and that it missed a trick by not restructuring the company early enough.

A few months ago Sir Peter Bonfield, BT's chief executive, announced the company would restructure, splitting its fixed-line business from its mobile business and its international joint venture with AT&T, Concert. Since then the only movement on the demerger has been the decision to float Yell, the Yellow Pages business.

Leading investors are understood to be anxious for the pace of progress to be stepped up. They believe BT has destroyed billions in shareholder value by not demerging its old regulated businesses from the faster-growing operations such as BT Cellnet and Viag.

One of the largest investors said Sir Peter had to make a decisive move to restore his credibility as someone who could bring change to BT. He argued that to carry out the restructuring, Sir Peter needed a strong, forceful finance director who could steer BT through a complex process. "Robert Brace is bouncy enough, but he is seen as too much of a bookkeeper," said the investor. "He's not the man for the job."

BT is understood to be in regular contact with its investors - the largest of whom include Prudential, Merrill Lynch, Mercury and Legal & General - and is well aware of their concerns.

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