BT should be split into three businesses, according to a new report by Forrester Research.
The analyst praised the company's restructuring into three lines of business - networks, innovation and retail - but argued that a full break-up could unleash £11bn more value for BT's shareholders.
Forrester believes that European incumbent telcos like Deutsche Telekom and France Telecom should also follow BT's example.
Lars Godell, a senior analyst at Forrester and the report's author, explained that restructuring internally along these lines, and a gradual opening up of a telco's value chain as BT has done, is the first step towards a new industry paradigm that Forrester calls a "layered telecom".
"BT is now structured into four main lines of business - BT Wholesale, Ignite, Openworld and Retail - which fits well with our vision of the path toward renewed growth," he said.
"Since completing its transition to a layered model in October 2001, BT has identified hard, quantifiable business benefits attributable to its new structure and business model."
Forrester believes that these benefits will deliver £10bn in value to BT in present terms.
"In total, these and future benefits will create a company whose equity value in present terms is worth 136 per cent, or £23bn, more than BT is valued today," said Godell.
But the analyst argued that by 2006, BT will reach the limits of what internal layering can deliver.
In 2006 a break-up, with a separate listing of BT's retail, innovation, and network businesses, will be seen as a natural evolution, not revolution, inside BT, explained Forrester.
A break-up carries significant risks that could destroy more than £5bn in shareholder value, but the report stated that the arguments against it don't stack up.
Forrester believes that a break-up is the next logical step for BT and that by preparing carefully and setting a timetable for a break-up in 2006, the firm could create 28 per cent more value for shareholders than internal layering.
With the risks managed, BT's newly fully independent businesses would concentrate on innovation, deliver higher revenues and achieve lower costs.
But the telco, which has resisted calls for a break up from MPs and rivals, is nonplussed by Forrester's claims that such a move would be in its interest.
"Nothing in the Forrester report has made us change our view that the present situation is best for customers, shareholders and the company," said a BT spokesman.
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