BT reorganization revives speculation over Asian assets
The company said it also plans to sell its directory services unit and may sell stakes in its web hosting and broadband businesses. It aims to reduce its debt by ú10 billion ($14.2 million) by the end of 2001 to halt the slide in its credit rating and reverse the decline in its share price.
Last month the company denied a report in the British Observer newspaper that it was considering selling some of its Asian assets, valued at an estimated $2.5 billion. But if the company can't raise as much as it hopes in Europe, it may be forced to target Asia.
"If BT does decide to divest itself of its Asian holdings it's going to be harder to sell them than it used to be," says David Gibbons, an analyst at HSBC in Hong Kong. "BT is not the only Western telco to be pressured by debt so there will be less appetite for global players to make acquisitions in relatively non-strategic markets like Asia."
Industry observers expect BT to raise the bulk of its funds by selling a minority stake in BT Wireless, a unit that includes Cellnet, the UK's second-biggest cellular operator, and majority stakes in Germany's Viag Interkom, Telefort of the Netherlands and Ireland's Esat. BT Wireless could be worth as much as ú40 billion, according to analyst estimates. The sale of a 25% stake could theoretically generate the funds BT needs.
The likelihood is, though, that the company will have to sell the stake at a discount to the unit's market value, as investors have other attractive investment possibilities on the horizon, such as a potential new issue of France Telecom's Orange. That could add pressure for BT to sell some of its Asian assets.
BT has been one of the biggest buyers of mobile phone assets in Asia. Its interests include stakes in Korea's LG Telecom, Malaysia's Maxis, StarHub of Singapore, Hong Kong's Smartone and Japan Telecom. These stakes, though, may also be tricky to sell at full market value. There's competition from Vodafone, which is trying to sell its 11.7% stake in Korea's Shinsegi Telecom, and from KG Telecom of Taiwan, which is offering up 40% of itself. Norway's Telenor has expressed interest in KG Telecom and NTT DoCoMo and Deutsche Telecom are also reportedly interested.
Many European companies are already too gorged on acquisitions and licenses to swallow anything new. And US telecom companies are concentrating mainly on their home market. If BT does decide to sell its Asian assets, the field could be open for Asian investors with cash on hand such as Singapore Telecommunications, NTT DoCoMo and tycoon Li Ka-shing's Hutchison Whampoa. SingTel, for one, makes no bones about its determination to become the dominant competitor in Asia.
"We want to be a key regional player," says Chia Boon Chong, a SingTel spokesman. "Our forte is in Asia and we are always on the lookout for acquisition opportunities in the region."
Even internet company Pacific Century CyberWorks of Hong Kong, which paid heavily to acquire Hong Kong Telecom and is now struggling with its debt-load, is determined to extend its reach throughout Asia. Singapore's Keppel Telecommunications and Transportation earlier this week refused to deny or confirm a report that it may sell its 35% stake in mobile operator MobileOne to the mobile phone joint venture created by PCCW and Telstra of Australia.
With European telcos on the ropes, any consolidation in Asia is likely to be regional, at least for now, analysts say.
"You may see a handful of Western telcos showing interest, but likely as not buyers for any BT stakes will come from within region," says HSBC's Gibbons.