British Telecom will purchase Telenor's 49.5 per cent stake in Esat Digifone next month if the Norwegian operator exercises an existing option to sell its shares, a senior BT director said yesterday.
Mr Pat Gallagher, BT's group director of strategic development, confirmed the company would pay a price of $1.24 billion (€1.44 billion) for the stake. This was the price agreed during BT's acquisition of Esat in January.
Mr Gallagher said BT had already taken this potential expenditure into account despite the announcement yesterday of a radical plan to cut BT's debt by $10 billion within 18 months.
Under the terms of BT's deal with Telenor, the Norwegian operator has until mid-December to decide what to do with its 49.5 per cent holding in Esat Digifone.
Telenor has a number of options. It could choose to sell its stake or convert it into a 33 per cent stake in Esat Telecom. A third option is to convert its Digifone stake into Esat shares and exercise an option to buy an additional 16.99 per cent of Esat Telecom at $624 million, raising its holding to 49.99 per cent.
Sources close to Esat Telecom said last night the Norwegian operator was playing its cards close to its chest. Many industry sources believe Telenor is most likely to sell its stake at the agreed price. This is a generous offer as European telecoms companies have lost 15-20 per cent of their value since BT struck its deal with Esat 10 months ago.
A representative of Telenor could not be contacted yesterday. However, Telenor chief executive, Mr Tormod Hermansen, has suggested in media reports recently that Telenor could raise cash by exercising options to sell its stake in Digifone and the German operator Viag.
In an interview with The Irish Times yesterday, Mr Gallagher said BT would "absolutely" purchase Telenor's stake in Esat Digifone, despite the price. He said Digifone was one of the best performing companies within the BT group. "Its a bloody good company," he said.
As part of its long-awaited restructuring, BT has decided to float 25 per cent of its wireless units, including Esat Digifone, by December 2001. Mr Gallagher said this would not result in Esat Digifone losing its distinctive brand but would enable the operator to reap cost efficiencies as it began the roll-out of a third generation mobile network.
BT has scaled back its global ambitions and will now focus on Western Europe and Japan. This will result in significant asset sales as non-core operations in Canada and the rest of Asia are sold. These are forecast to raise $5 billion for the company. BT has also decided to split its British network into a separate company and prepare to float BT Ignite. A further 2,000 jobs will be lost in this restructuring on top of the 3,000 cut last year.
The stock market was not impressed by BT's restructuring plan. BT's share price fell almost 5 per cent to 749p sterling following the announcement. Mr Neil Parkinson, chief executive of Esat Telecom said last night that BT's plans would have no effect on the Esat group.
