Securicor barred from phone stake sale to BT

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Industrial Correspondent

The Government has banned BT from buying the remaining 40 per cent of Cellnet, the mobile telephone operator, from its co-owner, Securicor, depriving shareholders of a possible cash or shares windfall. The decision was seen in the City as a bitter blow to both companies and left Securicor's non-voting A shares 7p down at pounds 10.

BT has been prevented from owning all of Cellnet since it was formed in 1982. Recently, it has been in negotiations with Securicor in the hope that the Department of Trade and Industry would relax the restriction. City analysts estimate the price to be paid for Securicor's stake would be between pounds 1.2bn and pounds 1.6bn.

Securicor said it had been informed by the DTI that it was unwilling "at present" to lift the restriction in Cellnet's licence to allow BT to own 100 per cent. It is thought that the DTI has not ruled out a change of policy in future but that no time limit has been put on the BT ban.

Christopher Shirtcliffe, Securicor finance director, said the company was considering all its options, which could include the sale of its stake to a third party. Although the DTI's restriction does not preclude such a move, any disposal would require government approval. A DTI spokesman said: "We would judge everything on its merits."

Mr Shirtcliffe added that Securicor might also consider "some sort" of flotation as well as simply holding on to the stake. "It is a very successful investment," he said.

Cellnet, which accounts for about 70 per cent of Securicor's profits, would say only that the situation remained unchanged. BT, which is understood to be bitterly disappointed, would say only that discussions with Securicor had ceased.

John Karidis, an analyst with Kleinwort Benson, said: "This is very disappointing news for Securicor. I think they will be hard pushed to find another buyer."

Cellnet, with 1.8 million subscribers, is rapidly catching up with Vodafone, the leading mobile telephone operator, in terms of market share. But Vodafone, which has a higher proportion of more lucrative business customers, outstrips its rival on profitability.

Vodafone is also more advanced in the vital area of digital mobile telephony, where the industry's future lies. The original networks built by Cellnet and Vodafone are based on analogue technology, while the newcomers, Mercury One-2-One and Orange, are digital. Vodafone already has 27 per cent of the fledgling digital market while Cellnet lags at 5 per cent.

City analysts also point to Vodafone's aggressive expansion overseas, which will act as a buffer as competition in the UK market increases. Cellnet has so far shown little interest in acquiring licences in other countries. Some observers feel that the window of opportunity for the company to make any impact in the international market is quickly closing.