British Telecommunications plc - owner of Esat Telecom - is finalising plans for a multibillion-pound rights issue to reduce its massive burden of debt. An announcement could come as soon as this week.
Britain's dominant fixed-line operator is preparing a sale of cut-price shares to raise around $7.20 billion (€8.1 billion), half the amount by which it has promised to reduce its £30 billion sterling (€48 billion) debt pile, sources said. It is also intending to demerge its mobile phone business by giving shares in BT Wireless to existing BT shareholders.
The share sale will form the centrepiece of a resuscitation that began with the appointment two weeks ago of Sir Christopher Bland to replace Sir Iain Vallance as chairman. It was followed last week with the sale of investments in Japan and Spain to Vodafone Group plc for £4.8 billion. The cash call is expected to be the biggest rights issue ever in Britain, around three times the amount raised by media company Pearson plc last year. The shares will be priced at a discount of up to half BT's stock market price, in order to convince investors to subscribe to the deal.
BT has been working to unveil the rights issue with its full-year results, scheduled for May 17th, with the option of bringing forward the announcements. BT is also planning to cut its dividend, and some institutional shareholders expect it to scrap the pay-out altogether this year. It is also working on a sale of its business directory division Yell for around £3 billion to two private equity groups.
