BT, now only the UK's second largest telco, has unveiled plans for a new rights issue, a flotation and a sell-off in an attempt to reduce its debt mountain.
The telco is £27.9bn in debt, triple last year's level, and has also reported a loss of £2.92bn after tax for the three months to the end of March. The loss was attributed to a £3bn charge for German subsidiary Viag Interkom after it failed to live up to expectations.
Financial institutions have warned that BT must reduce its debts in order to maintain its current credit rating. If it doesn't, and its rating is dropped the threatened two notches, the telco faces a damaging hike in interest payments.
New chairman Sir Christopher Bland has already sold foreign assets that are expected to cut around £5bn of debt, and has now proposed a rights issue expected to raise a further £5.9bn.
BT will offer current investors three new shares for every 10 held at 300p a share, a substantial discount on this morning's share price of 535p. The company is also saving money by deciding not to pay out a shareholder dividend this year.
Its share price has fallen by more than 40 per cent in the last 12 months, and BT has fallen behind Vodafone, which is now the UK's biggest phone company.
Other moves announced include the demerger of its BT Wireless division, which may take £2bn in debt with it, and either the demerger or sale of its Yell directories business.
According to reports, BT may also offload its half of the disappointing Concert joint venture with AT&T - which lost £89m in the three months to the end of March - and 6000 radio masts owned by its networking unit.
Previously announced plans include a sell off of property assets worth at least £2.1bn.
Bland said in a statement: "It will require determined and rapid action by management to achieve the transformation of BT. We have made a good start, the culture is changing, and I am confident that we can complete the process in the best interests of our shareholders, customers and staff."
Controversial chief executive Sir Peter Bonfield has hinted that he may leave when his current contract runs out at the end of 2002. "My contract is until the end of next year, and if the company wants a change then I'll leave," he said.
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