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BT plans barrage of IPOs
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November 9, 2000: 8:04 a.m. ET
Listings for wireless, online and network units will help cut debt by $14B
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LONDON (CNNfn) - British Telecommunications PLC sought to make over its image and bolster its finances Thursday, unveiling plans to list minority stakes in its cell-phone business and a clutch of other fast-growing units to help cut £10 billion ($14.2 billion) off its heavy debt load by the end of 2001.
BT Wireless, which analysts have said might be worth as much as $41 billion, will float in the second half of next year, BT said. The company also  plans to establish a new company, NetCo, to run its telecom wires.
The former monopoly, which called the shake-up one of the most important since it was sold by the British government in 1984, plans to sell up to 25 percent of NetCo and BT Wireless, and eventually list stock in BT Ignite, its global broadband communications unit.
The company said it's in talks to sell other businesses that could raise £5 billion. Together with the public offerings that should achieve its target of raising £10 billion to pay down debt by the end of next year.
"We want to fundamentally change BT," Chief Executive Peter Bonfield said in an interview with CNN, unveiling what he called the "radical and unprecedented" changes. "Our goal is to maintain our 'A' credit rating."
Credit rating agencies left their ratings on BT unchanged following the announcement. Fitch kept BT's unsecured debt rating at A1, after lowering it from AA+ in early September. Standard & Poor's held its long-term rating on BT at A. S&P lowered its rating on the company's debt to A from AA+ in late August.
The company reiterated an earlier pledge to list its Yell phone directory service this year, in which BT also plans to sell up to 25 percent.
The initiatives, coming at a time of volatility for telecom stocks in general, compounded by problems of BT's own, build on a revamp first unveiled in  April to re-organize company according to business, not geographic distinctions.
"It's not a knock-your-socks-off kind of restructuring, it's really just a continuation of what they've already done," said Martin Mabbutt, an analyst at UBS Warburg Dillon Read. "It's certainly along the right steps, but I don't think it's all that radical."
After opening higher, shares of BT (BT-A) shed 24 pence, or 3.1 percent, to 764 in London Thursday afternoon. James Downie, an analyst at ABN Amro in London said the market reaction to the restructuring was muted because "a lot of it was expected."
The stock's value has approximately halved since the start of the year.
Seeking a new image
The former U.K. telecom monopoly is working hard to shuck its image as a stodgy operator ill-prepared for the rapid changes enveloping the communications industry.
The restructuring will make BT "faster, more flexible, focused and better able to serve our customers and reward shareholders", Bonfield said.
Those shareholders have been clamouring for change. There have been reports of disputes between Bonfield and Chairman Iain Vallance, and the company's finance director, Robert Brace, recently announced plans to resign.
"I can categorically deny that Iain and I have a problem," Bonfield. "We get on very well."
Many telecommunications operators have suffered a stock market slump over the past few months as they wagered large sums of money to stake out positions in high-growth data communications, Internet and wireless markets.
BT said it will be sitting on a debt mountain of more than £30 billion by next year, partly because of the high costs of acquiring third-generation mobile-telephone licenses in Europe. The company called off plans earlier this year to raise £10 billion by a sale of bonds as its weakening credit ratings undermined the bonds' attractiveness.
Nomura Securities recommended in a recent research note that BT should sell its Asian and Canadian assets -- including a stake in Japan's J-Phone wireless provider -- to raise a total of up to $7 billion. Nomura also said BT needs to raise $15 billion from disposals to prevent S&P lowering its credit rating on the company to BBB.
Focus on Europe and Asia
BT said it has been focusing its investment activity in Europe and Asia, and a spokesman said for that reason "it would be very surprising if we were to relinquish our stake in J-Phone," which could be worth about $6 billion. BT also has about a 20 percent stake in Hong Kong mobile-phone operator SmarTone Telecommunications.
Despite the pressure BT faces on several fronts, Bonfield was optimistic about the planned IPOs.
"We think there is still an appetite for investment - we think this will be an opportunity for growth," Bonfield said.
Analysts at securities house Nomura have estimated the wireless arm is worth about $41 billion if free of debt. Downie said that including debt, the unit's market value is more likely to be about $29 billion.
Also Thursday, the company said second-quarter pretax profit fell to £471 million from £890 million a year earlier. Analysts polled by Reuters estimated the company would report pretax profit in the region of £375 million to £440 million.
Revenue in the three months through September rose to £7.6 billion from £5.3 billion. Earnings per share fell to 4.2 pence from 9.6 pence, against forecasts for between 3 and 4 pence. 
-- from staff and wire reports
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