Demerger Documentation
British Telecommunications PLC
24 September 2001
September 24, 2001
BT PUBLISHES DEMERGER DOCUMENTATION - POSTING TO BT SHAREHOLDERS BEGINS TODAY
BT today published documents relating to proposals for the demerger of its
mobile business, mmO2, and the creation of two new holding companies. Posting
of some of these documents, including a shareholder circular describing the
proposals to BTshareholders, will also begin today.
The demerger forms part of BT's restructuring strategy which was first
announced on May 10, 2001.
If approved, two holding companies, BT Group plc and mmO2 plc, will be
created. BT Group will comprise principally four separately managed lines of
business - BT Retail, BT Wholesale, BTopenworld, and BT Ignite - together with
its Concert joint venture. mmO2 plc will be made up of BT Cellnet, Digifone
(formerly known as Esat Digifone), Telfort Mobiel, Viag Interkom, Manx Telecom
and Genie.
Sir Christopher Bland, chairman of BT, said: 'BT shareholders will soon be
receiving details of the demerger, giving them the information necessary to
make an informed decision on the best way forward. It is important that
shareholders use their vote and I am confident they will do so to support the
demerger proposals, creating BT Group plc and mmO2 plc.
'BT Group's aim going forward will be to create value; value based on service
excellence, brand leadership, large scale networks and our extensive customer
base. We will also develop and market new, higher value broadband and Internet
products and services.'
David Varney, chairman of mmO2 plc, said: 'This is an important day for us -
it marks another milestone in the birth of mmO2, a business which will
continue to be a leading player in the European mobile industry. We are
committed to creating shareholder value as a member of the FTSE 100 by tight
management focus, growing our wholly owned businesses and continuing our
leadership in mobile data.'
Shareholder approval is being sought to implement the proposals at two
meetings, a Court Meeting and an Extraordinary General Meeting (EGM). Notices
convening these meetings, to be held in Hall 5 at the NEC, Birmingham, on
October 23, 2001, are set out in the shareholder circular. BT shareholders can
vote on the proposals by signing and completing the forms of proxy sent to
them, and returning them either by post or fax. Shareholders can also vote by
appointing a proxy, by using the Internet or by telephone, or by attending the
meeting.
If the proposals are implemented as expected, the Scheme is expected to
become effective on November 16, 2001, the demerger will become effective on
November 19, 2001 and trading in both the BT Group plc shares and mmO2 plc
shares will commence on November 19, 2001.
Notes for Editors
BT Group plc
BT Group plc will comprise principally four separately managed lines of
business - BT Retail, BT Wholesale, BTopenworld, and BT Ignite -
together with its Concert joint venture. BT Retail and BT Wholesale
are well established, cash generative businesses with market leading
positions in the UK, while BTopenworld and BT Ignite are rapidly
developing businesses, active in the markets for Internet and data
services, solutions and broadband.
BT Retail is the UK's largest communications service provider, by
market share, to residential and business markets. As at June 30,
2001, BT Retail provided 28.2 million customer lines (exchange line
connections) equating to a UK market share of approximately 83 per
cent. Some nine million of these were business lines and lines for
other service providers. In the opinion of the directors, BT's
relationship with its customer base represents a major strength and it
is the directors' intention to broaden the range of services offered
by BT Group, in order to reinforce this relationship.
BT Wholesale has the largest capacity network in the UK with the
greatest geographical reach and customer coverage. BT Wholesale
provides network services and solutions within the UK to
communications companies, network operators and service providers. BT
Wholesale aims to reduce its dependence on its regulated business and
grow its sales to other communications companies. Its strategy is to
provide total customer solutions, broaden its customer base, build and
develop relationships with other parts of BT Group, other network
operators and major communication suppliers, and establish a
reputation for outstanding service delivery. Its investment strategy
will satisfy demand for bandwidth and apply new technology to boost
capacity, provide the platform for next generation products and
services and reduce costs.
BTopenworld brings together in a single business all of BT's mass
market ISPs and Internet-related activities. It serves consumers and
SMEs in the UK with a range of narrowband and broadband Internet
access and related services. BTopenworld aims to generate additional
revenues for the Group by providing customers with services that add
value to the basic telephony service, earning subscription and
advertising and e-commerce revenues.
BT Ignite is BT's international, datacentric solutions and broadband
IP business. It has established a strong European footprint, serving
business customers with 52,000 route kilometres of fibre connecting
250 cities and 22 content hosting centres. BT Ignite delivers a range
of services, including customer solutions, application service
packages, web hosting, media services and data transport. BT Ignite
plans to continue to build its revenues from the high end of the value
chain. Value-added services, complex business solutions, hosting and
media distribution currently represent over 60 per cent of BT Ignite's
turnover.
Recent developments
BT is continuing discussions with AT&T concerning the future of the
Concert joint venture. Options currently being considered include
unwinding the Concert joint venture. Other strategic alternatives to
Concert are still being discussed, including continuation of the
venture in a modified form. In the event that an unwinding of the
Concert joint venture is agreed, and depending on the way that it is
implemented, the financial effects on the Group are likely to include
cash and non-cash restructuring costs which could be substantial.
These discussions are dealt with in more detail in the shareholder
circular.
In addition, BT expects to take an impairment charge against certain
of its other investments, including AT&T Canada, in its half year
results to 30 September 2001, totalling approximately £500 million.
BT's investment in AT&T Canada is discussed in more detail in the
shareholder circular.
BT expects to complete a sale and leaseback property transaction by 31
December 2001, under which it expects to receive proceeds of
approximately £2.3 billion. The Board now expects to reduce net debt
to between £15 billion and £17 billion at 31 March 2002 on the
assumption that the property sale and leaseback transaction has been
completed.
Dividends
The Board has decided that there will be no interim dividend for the
year ending 31 March 2002. The board of BT Group plc expects to
recommend a final dividend for the BT Group in respect of the year
ending 31 March 2002 and to resume regular dividend payments
thereafter. However, the level of dividends which BT Group expects to
pay is likely to be substantially lower than that paid by BT
previously.
mmO2 plc
mmO2 plc will be made up of BT Cellnet, Digifone (formerly known as
Esat Digifone), Telfort Mobiel, Viag Interkom, Manx Telecom and Genie.
It is a leading player in the European mobile market and is expected
to be a member of the FTSE 100 in the UK. The company has a strong
European footprint of wholly owned businesses comprising established
mobile operations in the UK and Ireland, and rapidly growing
businesses in Germany and the Netherlands.
mmO2 plc serves more than 16 million mobile customers in the UK,
Germany, Ireland, the Netherlands and the Isle of Man. Together, these
markets represent a total population of more than 160 million people.
mmO2 plc is a leader in mobile data and Internet in Europe and is well
positioned for GPRS and UMTS success. Genie, its mobile Internet
portal, is already one of the leading mobile Internet businesses in
Europe.
mmO2's strategy is to:
- increase its market share of higher value customers,
especially business and high usage individuals and young
adults, who have been early adopters of data services
- achieve competitive scale in Germany and the Netherlands
- focus on customer retention through good customer
service and network quality
- reduce costs by tight budgetary control and innovative
measures, such as the recently announced, network sharing deal
with T-Mobile in Germany and One2One in the UK
- exploit opportunities for performance improvement by
integration across mmO2 plc, helped by the focus of the new O2
brand.
mmO2 plc has an experienced management team and its growth will be
underpinned by its financial flexibility, carrying approximately £500
million of net debt on demerger, and having a funding facility of £3.5
billion to finance the development of its business.
Further information on the demerger
BT Group shares and mmO2 shares will each have their own market
price. Both BT Group shares and mmO2 shares will be traded on the London Stock
Exchange and their ADSs will be traded on the New York Stock Exchange. No
application is being made for either BT Group shares or mmO2 shares to be
listed in Japan.
The Court Meeting, which will be held at the direction of the Court,
has been convened for 10.30 am on October 23, 2001 to enable BT
shareholders to vote on the Scheme of Arrangement ('Scheme').
EGM
The EGM, to be held immediately following the end of the Court
Meeting, is being convened to ask BT shareholders to consider
resolutions to give effect to the Scheme and approve the demerger. BT
shareholders will also be asked to approve the mmO2 share schemes.
Shareholder approval is not being sought for the BT Group share
schemes since they are substantially the same as the BT share schemes
for which approval has already been obtained where required.
The proposals include a capital reduction in BT Group plc, following the
demerger, in order to increase the level of reserves available for future
distributions to shareholders or to facilitate future transactions.
Shareholders will be asked to approve this at the EGM and the Court will be
asked to confirm the reduction on November 20,2001 (to take effect on November
21, 2001).
Tax
For the purposes of UK taxation of capital gains ('CGT'), the Scheme
should constitute a scheme of reconstruction. Clearance has been
obtained from the Inland Revenue in respect of the Scheme under
section 138 of the Taxation of Chargeable Gains Act 1992 ('TCGA').
Accordingly, a BT shareholder will not be treated as making a disposal
for CGT purposes of his BT shares as a result of receiving mmO2 shares
under the Scheme, and so no chargeable gain or allowable loss will
arise on the cancellation of BT shares and the issue of mmO2 shares to
him or her. Such mmO2 shares will be treated as the same asset as the
BT shares, acquired on the same date and for the same consideration as
the BT shares were acquired.
Clearance has been obtained from the Inland Revenue under section 138
TCGA in respect of the demerger. Accordingly, a holder of mmO2 shares
will not be treated as making a disposal for CGT purposes when he or
she receives BT Group shares pursuant to the demerger. Any gain or
loss which would otherwise have arisen on a part disposal of mmO2
shares will be 'rolled over' into the BT Group shares received by the
shareholder pursuant to the demerger. Such BT Group shares will be
treated as the same asset as the mmO2 shares, acquired on the same
date and for the same consideration as the mmO2 shares were acquired.
Accordingly, following the Scheme and the demerger, a shareholder's
original base cost in his/her BT shares will be apportioned between
his/her mmO2 shares and his/her BT Group shares by reference to the
market quotations of the mmO2 shares and the BT Group shares on the
first day of dealings in such shares as derived from the Official
List.
Shareholder Helpline
A shareholder helpline has been set up on Freefone 0808 100 4141. This
operates between 8.30 am and 8.30 pm, Monday to Friday, and 10.00 am
to 4.30 pm on Saturdays, Sundays and UK public holidays. For legal
reasons the helpline will not be able to provide advice on the merits
of BT's proposals or to provide financial advice.
The contents of this press announcement, which has been issued by, and is the
sole responsibility of, British Telecommunications public limited company, has
been approved by Cazenove & Co. Ltd which is regulated in the UK by The
Securities and Futures Authority, solely for the purposes of Section 57 of the
Financial Services Act 1986. Prices and values of, and income from, shares may
go down as well as up and an investor may not get back the amount invested. It
should be noted that past performance is no guide to future performance.
Persons needing advice should consult an independent financial adviser.
Inquiries about this news release should be made to the BT Group Newsroom on
its 24-hour number: 020 7356 5369. From outside the UK, dial +44 20 7356 5369.
All news releases can be accessed at our web site:
http://www.groupbt.com/mediacentre
Broadcasts of interviews in video, audio and text with Sir Christopher Bland,
Sir Peter Bonfield, Pierre Danon, Paul Reynolds, David Varney and Peter
Erskine will be available on www.cantos.com and www.bt.com from 7.00am on 24
September 2001.