Outlook: BT/Cellnet

BRITISH TELECOM'S buyout of Securicor's 40 per cent minority interest in Cellnet has been so long expected and anticipated that most analysts and telecoms watchers had given up waiting. Perhaps it wasn't going to happen after all, they figured. Then out of the blue it suddenly arrived, and what a price BT seems to have negotiated.

Final agreement was hammered out after a recent Cellnet board meeting at which Securicor directors apparently threatened their BT counterparts with legal action for breach of fiduciary duty if they did anything against Cellnet's interests. In exasperation at Securicor's reluctance to agree a deal, BT had suggested it might go it alone in its application for the new generation of mobile phone licences, rather than pursuing the opportunity through Cellnet.

The threat and counterthreat seems to have concentrated minds somewhat and finally we have a deal. From the outside, it's hard to tell who gave ground most in this negotiation. As a minority to BT's majority, Securicor had only one possible buyer for its stake - one, moreover, which already manages the network and was responsible for most of the investment in it. In these circumstances it was always bound to get squeezed. Judging by the leap in Securicor's share price yesterday, the stock market seems to take the view it was lucky to get as much as it did.

By the same token, however, BT is paying far less than these assets might be expected to fetch on the open market. Pro-rata, the stake is costing BT less than half per subscriber than the value the stock market attributes to Orange. Of course, Orange has a more advanced network and better growth prospects than Cellnet, but even so, BT seems to be getting something of a bargain.

Unfortunately, a bargain is worth nothing to those who don't know how to use it and BT has not so far shown itself to be a brilliant manager of Cellnet. There is nothing BT can now do by virtue of having 100 per cent control that it couldn't do before. Regulatory constraints will continue to prevent cross selling and Cellnet has to be run as a stand-alone venture for accounting purposes.

Even so, BT has secured a bigger stake in the mobile future of telecommunications at what, by the standards of some recent transactions in this sector, looks to be a bargain basement price.

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