British Telecommunications PLC (BT) confirmed Thursday a plan to split the company, spinning off its wireless businesses as a separate company called BT Wireless, while other operations continue as BT Future.
The company is seeking to raise 5.9 billion pounds (US$8.4 billion) through a rights issue -- an offering of discounted shares to current stockholders -- to finance the restructuring, BT said in a telephone conference call. BT will offer three shares for every 10 outstanding shares, at an issue price of 3 pounds, a discount of 47 percent over the closing share price Wednesday.
Christopher Bland, who took over as BT's chairman on May 1, said he joined the company with a view to overseeing its breakup.
"It was only on the basis I was totally committed to today's decisions, and would be both responsible for delivering them and announcing them... that I joined BT," he said during the conference call.
The company's yellow pages directory operations, Yell Ltd., will also be sold or "demerged," BT said. Along with recent agreements to sell holdings in Japan, Malaysia, and Spain, the spin-offs represent "good progress" in debt reduction, the company said.
BT has come under increasing pressure to reduce its massive debt, largely incurred in moves to expand the company's wireless operations and buy licenses for 3G (third-generation) networks.
"I also suggested that I invest 1 million pounds of my own money," Bland said, adding that he had that commitment written into his employment contract. "And I intend to do that."
BT Chief Executive Peter Bonfield reinforced Bland's optimism about the breakup plan.
"We've accepted the realities of the current market, and (the plan) continues the process of separation by lines of business that we announced last year," he said. "We're moving forward while keeping the fundamentals of the business going strongly. There are no sacred cows, and we will deliver on today's announcements," Bonfield said.
Chief Financial Officer (CFO) Philip Hampton said the company is "taking a number of steps to establish greater financial stability and flexibility."
Following the announcement this week that BT would sell off assets in Asia, "there will be more to come," Hampton said.
BT plans to save some 1.4 billion pounds by halting dividend payments, Hampton said. "We don't believe it's appropriate to ask the market for 5.9 billion pounds, only to recycle a large part of that back out through dividend payments," he said.
In conjunction with its restructuring plan, the incumbent U.K. telecommunications giant brought forward its preliminary year-end financial results to announce its expected losses.
For its fourth quarter ending March 31, BT reported a loss of 2.9 billion pounds (US$4.12 billion), or a loss of 0.449 pounds per share share, compared to a profit of 437 million pounds, or 6.8 pence a share, for the same quarter in the previous year, BT said a secondary news conference for the press.
For its financial year, BT's loss was 1.68 billion pounds, or a loss of 0.277 pounds per share, compared to a profit for the year previous of 2.05 billion pounds or 0.317 pounds per share, the company said.
BT also announced that dividend payments on the year will be halted. "It is a regrettable but necessary step," Bland said.
In addition, the company will take a one-time goodwill impairment charge of 3.2 billion pounds, as part of its full takeover of German mobile communications provider Viag Interkom AG in January. Talks with AT&T Corp. over the future of the two companies' corporate telecommunications joint venture Concert Communications Co. are ongoing, Hampton said. "We don't yet know what the agreed way forward will be; there is a range of options, and we will do whatever we think is necessary to deliver shareholder value."
BT has in recent months repeatedly declined to comment on media reports that an option under consideration is a sale of its part of Concert to AT&T. The company's net debt level currently stands at 28 billion or 29 billion pounds, Hampton continued. "For BT Future our target is to get the net debt down to 15 billion to 20 billion pounds" by March 2002. "The actual level we hit will depend on the outcome of negotiations primarily on further asset disposals."
Bland, who is also currently chairman of British Broadcasting Corp. (BBC) on a part time basis until a successor is named, was appointed as the replacement for Sir Iain Vallance at the end of April. Since that announcement, there has been much media speculation about Bonfield's future role as CEO, something which he spoke to in the news conference. "I have signed a new contract that goes through the end of next year, after which time there is some flexibility. I plan to see the restructuring through," Bonfield said.
Trading on BT (BT^A.LON) shares on the London stock exchange fell in early afternoon trading, down 0.285 pounds to 5.40 pounds per share, a decline of 5.01 percent.