Mobile company to exorcise BT name ahead of demerger

BT Wireless, the mobile phone unit of British Telecommunications, is planning to drop BT from its name in a move to disassociate itself from its parent's tarnished image ahead of the demerger in the autumn.

The mobile phone unit, which owns the Cellnet brand in the UK, will rebrand later this year, relaunching itself as a separate entity. BT, which initially had an IPO in mind for the division, is believed to be committed to securing a "BBB" credit rating for BT Wireless ahead of its demerger, expected toward the end of November, banking sources said yesterday.

They said BT Wireless was looking to secure a £3bn-£4bn debt facility to give it additional financial flexibility once its rating had been confirmed. A "BBB" rating would be a strong indicator of the company's health and enable it to push ahead with those plans on favourable terms.

Banking sources pointed out that while BT Wireless was still talking to the credit rating agencies, BT was firmly committed to seeing the division start life with as little debt as possible. It is thought BT will load up to £2bn of debt into BT Wireless. By way of contrast, many European telecoms businesses have high debt levels after heavy spending on next generation mobile phone licences. Even Vodafone, Britain's biggest mobile operator, had around £6.7bn of debt at the end of March.

Since BT announced the demerger plans, BT Wireless has been busy building an executive team to steer it through the next stage of its development. The former BG head and demerger specialist, David Varney, was brought in as chairman while Andrew Sukawaty, the former chief executive of NTL, was recently appointed deputy chairman. Paul Myners, renowned for his recent review of institutional investment, has also joined as non-executive director. Both Mr Sukawaty and Mr Myners take up their roles on the BT Wireless board in late summer.

While the company's larger shareholders favoured a demerger as part of BT's wider strategy to reorganise its own finances, the move has not gone down well amongst smaller shareholders. The Communication Workers Union staged a protest against against the demerger outside BT's Annual General Meeting in Nottingham last week. Shareholders at that meeting also urged the board to rethink its strategy.

Separately, BT Wireless has proposed that five operators share two networks for 3G mobile phone services in the Netherlands. Peter Erskine, BT Wireless's chief executive, was quoted as saying the talks included Vodafone, KPN, France Telecom and Deutsche Telekom. "I would not be surprised if we end up with just two networks in the Netherlands. All of us are working toward it and talking to each other to make it happen. The Dutch government is being very open-minded and pragmatic," he said.

BT Wireless is also thought to be looking to fund start-up businesses with plans to develop applications and content for 3G mobile phone services.

The company recently announced that its total customer base stood at 16.1 million including 10.9 million users in the UK under the Cellnet brand.

However the company has changed the way it reports its figures, ignoring pre-pay customers who have not used their phones for three months. For the three months to June, BT Wireless added 492,000 new customers, a like-for-like increase of 3.1 per cent. The company now has 10.4 million active pre-pay customers and 5.7 million contract customers.