New BT investors who chose not to apply through high street share shops operated by banks, building societies and stockbrokers will receive a maximum of 375 shares, with those applying for more than 375 getting none.
SG Warburg, the Government's adviser in the pounds 5bn BT share sale, said the allocation policy reflected a desire to favour existing shareholders and employees, who accounted for half the applications from UK private investors. But it added that more than half of all applicants in the UK public offer would get all the shares they wanted.
In all, 60 per cent of the shares in the sale of the Government's remaining 22 per cent stake in BT have been earmarked for the UK public. The rest go to institutions worldwide and to larger private investors in the UK who took part in the international offer by bidding for shares in a retail tender.
The price of the shares in the international offer has been set at 420p, compared with a closing price on Friday of 408.5p for currently traded BT shares. The UK public will pay 410p, or 390p if they take advantage of all available discounts rather than opting to take bonus shares.
The initial instalment is 160p for institutions and 150p for private investors, with further instalments due in March and October next year. Dealings in the partly paid shares begin this morning. Last week some City sources predicted the part-paid shares could change hands for 170p to 175p.
The proceeds to the Treasury will be pounds 3.55bn in the current financial year, which will help make a dent in this year's expected pounds 50bn budget deficit. Stephen Dorrell, the financial secretary to the Treasury, said: 'BT3 has been a tremendous success. The offer structure has been effective for both share ownership and for the taxpayer.'
The global share offer was almost six times subscribed, with institutions bidding for 2.9 billion shares compared with less than 500 million available to them. Many institutions will therefore receive a relatively small proportion of the shares they wanted. Although no preference was given to UK institutions, they have been allocated almost half of the shares in the international offer, with investors in North America taking 20 per cent.
Warburg said that institutional allocations favoured those who were net buyers of already-traded BT shares in the run-up to the new share sale and penalised net sellers. Those who bid early for new shares at a high price have also been favoured. By Friday night, when bidding closed, there were 3,000 strongly priced bids in the system for the international offer.
A spokesman for the Treasury said: 'As far as I am aware, this is the first offer of any size that has been priced with no discount to the market.'
First instalment cheques sent by people who have received no shares will be returned. Investors whose applications are scaled back will be sent the balance of their initial payment with share certificates on or before 28 July. The Government warned that people dealing in shares before receiving a certificate risk selling shares for which they have not received an allocation. Those who went through share shops may have to wait longer for their certificates.
Almost 1.7 million people applied for shares in the UK public offer compared with around 3 million in the last sale of BT shares in 1991, when demand was such that the public received two-thirds of the shares.
A spokesman for the Treasury denied interest in the privatisation process was flagging. He said: 'Getting 1.7 million people interested in BT yet again is a tribute to the offer structure and to the company as an investment.'
Private investors in the UK who took part in the retail tender receive at least 60 per cent of all the shares they applied for but pay the same price as institutions. Applicants in the retail tender who wished to invest their shares in a personal equity plan received all the shares they wanted. PEP investors could apply for a minimum of 1,000 and a maximum of 2,000 shares.