BT takes loan to fund 3G bids

British Telecom said it has arranged a £16bn loan to cover its spending on third generation mobile licences across Europe, and not in preparation for a major acquisition, as had been rumoured.

But the telco, which announced today that its annual profits had fallen by 32 per cent, said it will not be cashing in on the loan but will use it as a guarantee for short-term investments include bidding for UMTS (Universal Mobile Telecommunications System) mobile phone licences with its partners in Spain, Germany, Holland and Japan.

"This is not a £16bn loan that we will draw down from - it is a back up facility. We don't plan to spend it, but will cover all investments over the next months," said Robert Brace, finance director at BT.

Last month, BT secured a 20-year 3G licence in the UK for around £4bn and said today it was confident of securing a licence in Japan within the next month. The company has asked the High Court to rule on whether the UK Government has acted fairly in its decision to allow Vodafone to delay payments until after its de-merger with Orange.

BT today played down speculation that it was preparing for a big acquisition in Europe, such as Spanish telco Telefonica. Sir Peter Bonfield, BT's chief executive, said the company does not comment on market rumours, but said it talked to everyone, including Telefonica, in its normal course of business.

In announcing the plunge in pre-tax profit, BT blamed increasing competition and the acquisition of new businesses. Profits before tax in the year to 31 March fell to £2.94bn, down from £4.29bn reported in 1999.

However, a rise in internet traffic and mobile phone calls increased total turnover by 20 per cent, BT said. Excluding the effect of acquisitions, such as retailers DX Communications and Martin Dawes, mobile communications turnover in the UK increased by 31 per cent.