BT to sell Japan Telecom stake to Vodafone
Needs the money
BT is to sell its 20 per cent stake in Japan Telecom to Vodafone in order to relieve its debt burden. It is also in talks with Vodafone - which, let's remember, is a main rival in the wireless market - to sell its 17.8 per cent stake in Spanish mobile company Airtel.
These are tough decisions but they had to be taken and new FD Phillip Hampton is likely to gain some respect for having the balls to face up to BT's problems.
BT took a 15 per cent stake in Japan Telecom back in April 1999 along with AT&T - which also took 15 per cent. This was back in the days when BT and AT&T thought they would ride hand-in-hand into the sunset. BT coughed up £1.2 billion for its share.
Subsequently, BT was late in the mobile market and could only manage minority share holdings of lots of mobile companies in Europe rather than majority shares in few. This flawed approach has cost the company a fortune and given it little to bargain with.
By picking up BT's 20 per cent share - and also its 25 per cent share in Japan Telecom's wireless arm J-Phone, Vodafone is right on the edge of a majority shareholding in the telecoms company.
So now, with debt at £30 billion, BT is selling off holdings to get back on track. It will hurt to lose 20 per cent of Japan Telecom - which is the key to Eastern markets - but it's the right thing to do. The City rewarded the decision by pushing up the share price nearly five per cent - the first time that's happened for a while. Vodafone's shares dipped slightly.
The selling news comes as Sir Iain Vallance leaves and Sir Christopher Bland steps in. It is widely expected that BT will announce a £5 billion to £10 billion rights issue some time soon. ®