BT may seek to raise £6bn from investors in rescue rights issue

British Telecom is considering increasing the amount it plans to raise from its rescue rights issue to as much as £6bn

British Telecom is considering increasing the amount it plans to raise from its rescue rights issue to as much as £6bn.

BT had originally intended to raise around £5bn from shareholders from the deeply discounted offer ­ a record for a British rights issue ­ to tackle its £30bn debt mountain. But improving market conditions and investor confidence have persuaded it to look at raising more.

However, a senior BT source rejected reports that the size of the rights issue could be increased to as much as £10bn. The company's advisers are understood to have advised that there is not enough capacity in the equity markets to raise that amount of money in one go.

BT sources also pointed out that even a £6bn share raising exercise would dwarf any rights issue seen before in the UK. It would be more than three times the size of the UK's current biggest rights issue ­ Pearson's £1.8bn cash call last year.

The company has set a target of reducing its debt levels by £10bn and the new chairman, Sir Christopher Bland, is expected to sanction plans to press ahead rapidly with the corporate restructuring when he takes up the post tomorrow.

The sale of BT's directories business, Yell, could raise £3bn. BT's board has given Yell management the authority to enter a short period of exclusive negotiations with the venture capital groups Apax Partners and Hicks Muse Tate & Furst in an attempt to strike a deal.

But BT sources said that a demerger of Yell remained a firm option if a deal with a financial buyer failed to raise an acceptable amount for shareholders.

The company may also still press ahead with the disposal of its interests in Japan Telecom and its mobile affiliate J-Phone. Last November, these Japanese assets were described by BT as core but the decline in telecoms valuations since and the need to hit the £10bn debt reduction target has forced BT to redefine what is really core.

BT is continuing to explore the creation of a separate company, NetCo, to own its domestic network which could then be subject to a partial flotation with up to 25 per cent of the business sold off. But a BT source conceded this was no longer on a "short fuse" given the regulatory, political and financial complexities of the plan.

The desire to restore investor confidence could see BT bringing forward publication of its full-year results from 17 May but no decision has yet been made.