BT overspent £10bn on licences, says Bonfield

date: 18th February 2001, source by: sunday-times.co.uk

SIR PETER BONFIELD has admitted that British Telecommunications spent £10 billion too much on acquiring licences for the next generation of mobile phones.

The overspend - almost entirely due to the £4 billion BT paid for its British licence and the £5.5 billion cost of its German one - represents a third of the £30 billion debt mountain the company is struggling to reduce. BT Wireless acquired its other licences at modest prices. "We spent £10 billion too much," said Bonfield.

The admission may increase pressure on Bonfield, chief executive since 1996, and Sir Iain Vallance, his chairman. However, Bonfield is determined to see through his plan to cut debt by £10 billion by floating a 25% stake in BT Wireless, which includes Cellnet.

It has also emerged that BT's restructuring will cost the Treasury "billions" of pounds in lost tax revenue. The group's corporate structure is tax inefficient because most of its assets are owned by the parent company. BT wants to create a new holding company and a series of independently managed businesses.

Bonfield's comments to The Sunday Times underline the strength of the industry's unhappiness about the outcome of the government's auction of third-generation (3G) licences last year.

It is understood that Chris Gent, chief executive of Vodafone, blames France Télécom, which allegedly acted as a "rogue bidder" and forced up prices. Like BT, France Télécom is now weighed down by debt. Credit-rating agencies downgraded the French group last week after it raised a disappointing amount from the flotation of a 15% stake in Orange, the mobile-phone business.

BT also faces a downgrade from Standard & Poor's after the rating agency said the British group was unable "to adequately communicate a debt- reduction strategy".

BT will need government approval before it can put the holding-company structure to its shareholders. The loss of tax revenue that this involves may complicate negotiations as the government turns its mind to a likely spring election.

Bonfield, chief executive, said the proposed restructuring was one of the most complex ever attempted. Since its origins as part of the Post Office at the turn of the last century, BT has acquired hundreds of thousands of "wayleaves", such as rights to lay cable. These obligations, or the records for its 20m customers, must be assigned to a successor company.

Bonfield said the roll-out of 3G networks would be much more difficult than expected a year ago, because of proposed changes to the planning laws. He said: "Everyone like mobile phones but no-one likes mobile-phone masts."

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