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British Telecom needs a deal
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September 18, 2000: 9:33 a.m. ET
Investors mostly shrug at talks to broaden business alliance with AT&T
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LONDON (CNNfn) - Investors gave a half-hearted shrug to British Telecommunications PLC's latest attempt to bolster its flagging stock price Monday.
BT has lagged its European partners in several key aspects of the race to become a 21 st century telecommunications company, and a halving of the company's value reflects the market's negative perspective on the firm
British Telecom, the country's dominant fixed-line operator, said late Sunday it is in talks to broaden links with U.S. joint venture partner AT&T Corp (T: Research, Estimates) that "may or may not lead to any change in the existing alliance arrangements."
BT (BT-A) and AT&T are partners in Concert, which provides communications services to multinational companies, and in the Advance wireless alliance.
"They badly need to do something," Paul Mount, a London-based analyst at investment bank Nomura, told CNNfn.com. "Strategically they are behind their European competition, such as Deutsche Telekom and France Telecom, but this is a stock the market is keeping an eye on."
 Mount advised investors to sell the stock at 1,000 pence per share ($14) but now has British Telecom under review for a possible upgrade. The stock has slumped 44 percent since the beginning of the year from a high of 1,423 pence, and was last at 808 pence in afternoon trade in London, up less than 2 percent on the latest news.
Meantime, France Telecom SA (PFTE) has only depreciated 5 percent and Deutsche Telekom (FDTE) 39 percent over the same time span.
While France Telecom, Spain's Telefónica and Deutsche Telekom have moved quickly to list stakes in their Internet and cellphone units, BT has been slow to judge investor interest in the "new economy".
BT has said it plans to sell shares in its directory listing business Yell. Unlike its European rivals BT's domestic Internet unit is a bit-part player among Britain's online community, while France Telecom's Wanadoo Internet service provider unit and DT's T-Online International AG have hovered a majority of all the people logging on in their countries.
"In our view BT needs to split," Mount said. "It needs to combine its Ignite (data network business) with Concert to avoid conflict of interest. It needs to reduce its debt and partly list its wireless assets."
In April, BT announced plans to rejuvenate its business creating three new international businesses - Ignite, BT Wireless and BT Openworld, to address the expanding data, mobile and internet markets.
Once Britain's largest phone company, BT has sat back and watched cable operators take a huge bite out of its traditional land line business and niftier operators, like Colt Telecom Group PLC (CTM) are now providing services to businesses.
Vodafone Group PLC (VOD), the world's largest mobile phone operator, has grown at a staggering rate acquiring Mannesmann of Germany for $173 billion and now bestrides the U.K. mobile market and many parts of Europe.
BT's counter-attack involved increasing its stake in Germany's Viag Interkom to 90 percent for $6 billion, and it has spent more than $20 billion on third-generation mobile phone permits.
The spending splurge resulted in credit agency Standard & Poor's threatening recently to cut BT's debt rating. BT has accumulated more than £30 billion in borrowings.
"Slowly, slowly BT is moving in the right direction." Mount said. "Lets wait and see what comes of the talks. There's little at the moment to inspire the market." 
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British Telecom
AT&T
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