BT pulls plug on shareholder meeting

Calls for heads to roll, together with mounting concern over the telco's £30bn debt mountain, makes it a bad time to face the shareholders

Unconfirmed reports suggest BT (quote: BT) may have cancelled the shareholder meeting due to take place this evening as pressure mounts on the telco to explain its debt-reduction strategy.

One possible reason for the cancellation is that the timing is just too sensitive, as speculation increases about an imminent float of BT Wireless and the sacrifice of chairman Sir Iain Vallance and managing director Sir Peter Bonfield to angry investors. A decision by credit rating firm Moody's Investors Service to review its debt rating will not have helped.

BT was due to discuss its £30bn debt with shareholders this evening and the general consensus is that it would ask investors for a rights issue. In effect this offers a carrot to investors in the form of below marketprice share options in return for cash to offset its huge debt. In November Bonfield pledged to pay off £10bn through the sale of assets and flotation of some of its divisions.

Philip Crate, a telecoms analyst with Bear Stearns, believes that if BT wants investors to stump up more cash it will have to make a sacrifice. "There is a lot of angst on the part of BT shareholders about the piling up of debt," he said. "They hold Vallance and Bonfield to book and will be looking for their pound of flesh if they are going to put their hands in their pockets to balance the books."

Crate believes that the biggest bugbear among shareholders is BT's acquisition of German telco Viag Interkom and the money it paid out to buy it. "It was a very costly acquisition and was a waste of money. Viag Interkom is the number three player in Germany and has an awful performance record so investors are scratching their heads and asking why on earth BT spent £10bn on buying a license for this pile of crap."

BT refuses to be dragged into discussion of its debt problems. A spokeswoman claimed the negative outlook forecast from Moody's was "not unexpected". "Debt concern is an issue for the whole telecoms industry and our strategy has not changed," she said. She denied that BT has missed its opportunity for a wireless selloff. "That is easy to say with hindsight but we will bear the market conditions in mind," she added.

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