MmO<SUB>2 </SUB>in £1.5bn bond bid

MmO2, the recently demerged mobile phone arm of BT, is to launch a £1.5bn bond in January to fund the roll-out of next-generation wireless services.

It is understood mmO2's chief executive, Peter Erskine, has penned in the third week in January for the project, to be handled by Deutsche Bank.

The money will be used to help finance the opening of GPRS services next year, which will allow rapid internet access from mobile phones.

In 2003, mmO2 plans to launch third-generation services, which will offer even faster internet access, and looks like the next battleground for customers.

Analysts said there would be strong appetite in the City for an mmO2 bond because many pension funds were switching from equity investments to debt. The dearth of sterling bond issues over the last year meant there was pent-up demand for corporate debt.

MmO2's shares, floated last month, have risen 23 per cent. On Friday, Deutsche Bank upgraded its recommendation on the stock from "buy" to "strong buy".

MmO2, which used to be called BT Cellnet, was demerged from BT with only £500m of debt. But it has arranged a £3.5bn loan facility, which is rated two notches above junk status by credit agency Moody's and one notch above by Standard & Poor's.