Restructure Proposals
British Telecommunications PLC
9 November 2000
STATEMENT FROM SIR PETER BONFIELD, CEO of BT
Key highlights of Sir Peter Bonfield's statement:
* The creation of a new BT Group holding company
* A new network company, NetCo, with a strategic intent to list separately
subject to regulatory and Government agreement
* Tightened market focus to within Western Europe and Japan; global reach
through Concert and its distribution network
* Up to 25 per cent of BT Wireless to be listed next year
* Up to 25 per cent of Yell to be listed by the end of the financial year
* By the end of 2001 BT Ignite will have been developed into a position
from which it could be listed
* Debt to be reduced by £10bn through disposals and listings by December
2001
SIR PETER BONFIELD SETS OUT BT'S STRATEGIC DIRECTION
Sir Peter Bonfield said: 'Today I am announcing the acceleration of BT's
transformation through a radical and unprecedented restructuring of the
business. In April we changed the structure of the company away from a
geographic emphasis into lines of businesses. Today's announcement builds on
that and is the result of a comprehensive review of strategic direction. In
fact, I'd go as far as to say that we're being more radical than any other
telecoms operator in the world.
In April I said that if we were to stay ahead of the game we needed to keep
updating the way we supply what our customers want and need. That means
further structural change and even more focused and accountable businesses. So
today I am announcing a series of new steps which will maximise shareholder
value, while also encouraging BT management to focus on their key customer
groups. The businesses will be better placed to prioritise and pursue the main
opportunities for growth which will be in wireless, broadband and IP, and
within Western Europe and Japan.
A NEW NETWORK COMPANY
In April I announced plans to separate the Wholesale and Retail businesses.
Now I'm accelerating those plans and, in the first move of its kind anywhere
in the world, we are going to create a new network company, NetCo, which will
be both structurally and managerially separate. This radical move to re-shape
the UK communications industry is no less dramatic in its way than the
original privatisation back in 1984.
The move is pro-competitive and removes any perceived conflicts between NetCo
and the rest of BT. The new NetCo will be able to focus solely on meeting the
needs of the other licensed operators and service providers including, of
course, BT Retail and BT Ignite, and they will all benefit from being served
by a company that has a clear, separate and exclusive emphasis on their
distinctive needs.
I am convinced that the continued expansion in demand for voice, data and
Internet products means that the new NetCo will have significant opportunities
for growth and a great future.
Once the precise shape of the new NetCo has been defined, and the structural
separation completed following our discussions with the Government and Oftel,
we intend to seek a separate listing for up to 25 per cent of NetCo.
I am also announcing today that we will list up to 25 per cent of BT Wireless
operation in the second half of next year, and up to 25 per cent of Yell before
the end of this financial year. By the end of 2001 we will have developed BT
Ignite into a position from which it too could be listed.
It goes without saying that the final form of NetCo, and the arrangements for
its listing, will take into account the needs of all our stakeholders. In my
view, the creation of NetCo (a fully separate company) should reduce the need
for those aspects of regulation which derive from our current vertically
integrated structure.
A NEW HOLDING COMPANY
We are also going to create a new holding company. It will be lean, focused
and light touch. It will make us more agile and make it easier to facilitate
acquisitions, joint ventures and listings, where they are in the interests of
the business, our customers and our shareholders.
It also means that each business will be able to focus on the needs of its
particular customers, and create its own style and culture.
This new corporate and divisional structure will provide enhanced financial
and operational flexibility. Shareholders will also see improved operations, a
more entrepreneurial management culture and greater clarity.
This action will reshape the UK telecoms market and will allow us to
operate as a completely different kind of company. We're going to be faster,
more flexible, focused and better able to serve our customers and reward
shareholders in what is definitely the most dynamic and exciting of sectors.
Although they are operationally separate, BT Retail, BTopenworld, BT Wireless,
BT Ignite, and Yell will work together to create complete solutions for their
customers in the wireless, Internet, broadband and e-commerce areas.
I am confident that these businesses will benefit greatly from the synergies
that come from shared parental ownership, underscoring the value of staying
within one group.
This new holding company, together with the structural separation of NetCo,
will provide further productivity improvements. We've already exceeded our
target of 3,000 for the reduction of management and more than 5,000 people
will have left the business by the end of this year. As we continue to focus
on costs and productivity this downward trend will continue.
SHAREHOLDER APPROVAL
Sir Iain Vallance, BT's chairman, will write to shareholders in early February
next year detailing the benefits of the new holding company and the structural
and managerial separation of a new NetCo as well as explaining the process for
formal adoption. Our shareholders will be asked to approve the creation of the
new holding company at the Annual General Meeting in July 2001.
I expect NetCo to be up and running during 2001. We will seek shareholder
approval for the listing of the new NetCo, if necessary, at an Extraordinary
General Meeting as soon as possible following approval from the Government.
STRATEGIC GEOGRAPHIC FOCUS
Over the past 18 months, we have executed our strategy of investing in high
growth businesses with a substantial focus on Internet and wireless. These
investments have included taking a controlling position in our operations in
Germany, the Netherlands and Ireland, investing in wireless in Japan, and
acquiring 3G licences in the UK, Germany, the Netherlands, Spain and Japan.
We are now tightening our primary in-country geographic focus to within
Western Europe and Japan which is where we have been concentrating our
investment activity. Our primary route to providing global communications
for our customers will be via Concert, our 50/50 joint venture with AT&T. And
we're discussing with AT&T ways to broaden and strengthen what is already one
of the most successful global networks.
DISPOSALS
One result of the tighter geographic focus is that we shall be able to realise
value from some of our excellent assets. We have created significant
shareholder value by buying early into the life-cycle of these ventures at
attractive prices and now is the time to realise and redeploy that value.
Discussions are already proceeding with some of our partners and I am
confident that the disposals programme should generate around £5 billion cash.
Taken together with the planned partial listings of BT Wireless and Yell, we
will be able to reduce our debt by at least £10 billion by December 2001.
CONCLUSION
In summary, what I am announcing today is a clear, distinctive, radical and
executable strategy and puts customers at the heart of what we do. The BT
Board and executive are united in their determination to deliver this strategy
and to create value for our shareholders.
This is not the end of the process which began in April. The transformed
BT will have an open structure which will continue to evolve as the market
place develops. It will liberate our people and our assets, enhance
shareholder value and, above all, generate growth.'
Notes to Editors:
Summary of timescales and commitments:
* The structural and managerial separation of NetCo in 2001 with a
strategic intent to list separately, subject to satisfactory approvals
from the regulator and Government
* A tightening of strategic geographical focus to within Western Europe
and Japan
* A listing of up to 25 per cent of BT Wireless during 2001
* A listing of up to 25 per cent of Yell by the end of the financial year
* The formation of a BT Group holding Company, with shareholder approval
to be sought at the AGM in July 2001
* By the end of 2001 BT Ignite will have been developed into a position
from which it could be listed
* The reduction of debt through listings and disposals by at least £
10billion by December 2001
Inquiries about this news release should be made to the BT group newsroom on
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From outside the UK dial +44 20 7356 5369.
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