Positive reaction to the new wave BT

Industry approves BT's tardy restructuring

The radical restructuring of BT (quote: BT.) has been welcomed as a positive step by industry Thursday although experts think it has come a year and a half too late.

BT splits its fixed line business into wholesale and retail arms and creates four new businesses designed to put BT "ahead of the wave in communications" according to chairman Sir Peter Bonfield.

"It is a positive step for BT, customers, employees and shareholders," says Bonfield. Analysts agree but question why it has come so late. "BT has strategically lost its way -- this would have been a good announcement 18 months ago," says Ovum analyst John Matthews.

Matthews believes the decision to restructure was made primarily to please the City. "It was triggered by a slide in BT's share price. The BT board had a nasty shock when it realised it was vunerable to a hostile take-over bid," he says. The City has reacted favourably so far with BT's share price up Thursday.

Speculation is rife about which division will follow BT's newly-created international directories and e-commerce business Yell into IPO. Bonfield is hopeful Yell will be worth "a lot of money" but is giving nothing away about which will float next. "Each of the businesses have been set up for potential IPO. We and the shareholders will list where there is sutainable benefit. It is not about short term pops in our share price. Yell will be listed -- others will follow," he says.

Ovum's Matthews believes BT Wireless may be next. "It wouldn't surprise me to see a partial flotation of mobile. If BT wins one of the broadband licences they will have to pay a lot of money for it and may need capital," he says.

Telecoms watchdog Oftel welcomes the decision to restructure. "The proposals create greater transparancy and make it easier to regulate," says an Oftel spokesman.

Marketing director of business telco Fibernet believes the restructuring of business will "expose BT to the realities of commercial life." Bonfield is keen for the telco's new divisions to lead the field in mobile, broadband and the Internet but Matthews is not convinced. "It is the right target for them to set but they are not leaders in Internet or mobile at the moment and they have to work hard to achieve it. The question is, can the culture of BT be changed to make it work?"

BT also plans aggressive expansion in Europe, with a £4bn spent on a European backbone and plans to bid for local copper in Europe, offering broadband services in the Netherlands and Germany initially. In the UK BT will extend its broadband rollout to cover 50 percent of the population by mid 2001 and offer 1 and 2Mbit/s services.

The new wave BT in a nutshell

The four new businesses are:

  • Ignite will focus on BT's broadband IP business in the corporate and wholesale markets.

  • BTopenworld will be BT's new Internet business, focussing increasingly on broadband.

  • BT Wireless will look after BT's international mobile business, emphasising mobile data and next generation services.

  • Yell is the new name for BT's international directories and e-commerce business and will be the first of the four to float.

BT is also planning a radical separation of its fixed business into wholesale and retail in order to give more focused management and great regulatory clarity.

BT has had to follow the dictates of an ignorant stock market, like so many other corporations, and is splitting off its Internet business so that shareholders can buy shares in that sector. Go with Guy Kewney to read the news comment.

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