Investors urge BT break-up

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The Independent Online

BT is under pressure from shareholders to break itself up in an attempt to arrest its plummeting share price.

BT is under pressure from shareholders to break itself up in an attempt to arrest its plummeting share price.

Investors would like the former state monopoly to start by floating off its internet operations, following the successful example of Deutsche Telekom.

One institutional shareholder said: "Structurally, it has usually been a good thing for other companies to float off their dot com businesses and I think the internet business might be more valuable if it was separated. What BT has to recognise is that it is not maximising its potential."

One banker explained: "If you look at the example of Cable & Wireless, they said they thought they were a more valuable company than the market thought. When the market disagreed, they started spinning things off to prove their point."

BT's share price has been on the slide since the start of the month when the company issued a profits warning.

The fall was aggravated last week after Chancellor Gordon Brown said he had agreed with Oftel, the telecoms regulator, to bring forward the date when BT will lose its monopoly of the "local loop".

BT had expected to retain the lucrative monopoly until July 2001 and chief executive Sir Peter Bonfield rejected the possibility that the timetable for opening up the loop could be altered. In the same speech, the Chancellor also called for a cut in the cost of internet use, a key source of revenue for BT.

Separately, it emerged that Sir Peter met Tony Blair just two days before Mr Brown's speech but was given no warning of the contents of a speech which has had such a dramatic effect on BT's share price. The shares, which at one stage exceeded £15, closed on Friday at 964p.

The company has already taken steps to highlight the value of its component businesses by promising to provide separate results for Cellnet, its mobile phone arm, and Concert, its joint venture with America's AT&T.

However, this may not be enough to placate shareholders who believe that BT's management would be better able to focus if the business was slimmed down.

Both Concert and Cellnet may also be candidates for spinning off.

Another possibility would be for BT to consummate its relationship with AT&T with a full-blown merger.