BT to Spin Off Wireless Unit in Restructuring

Staggered by debts and scorned by investors, British Telecommunications announced a sweeping plan Thursday to spin off its mobile-phone division BT Wireless and raise cash through Britain’s biggest-ever share rights issue.

BT called a temporary halt to dividend payments to help it slash $14.2 billion from the debt it amassed by buying third-generation mobile-phone licenses and stakes in several overseas companies.

It also confirmed that it’s in talks that might result in the sale to AT&T; Corp. of its stake in Concert, the corporate telecommunications business that BT owns with the U.S. company.

Although these restructuring steps had been expected, they marked a climax in a series of recent moves to scale back the global ambitions of a company that once was the biggest in Britain and seen as a paragon of technological prowess--as well as a model of British privatization.

“Taken together, these measures will greatly strengthen the financial position of BT,” said Christopher Bland, who took over last week as chairman.

BT also released financial results for the fourth quarter that underscored the need for a rapid turnaround. The company posted an after-tax loss of $4.13 billion, compared with profit of $621 million in the year-earlier period, as sales rose 14.3% to $7.7 billion.

Ballooning interest expense and a severe write-down in the value of its investment in Germany’s Viag Interkom accounted for much of the loss.

BT, long a state-owned telecommunications monopoly, was sold off under the government of former Prime Minister Margaret Thatcher in 1984. It was considered a showpiece in the effort to privatize state-run industries.

BT made an aggressive bid to expand overseas and into new businesses but has been left with $43 billion in debt.

In an effort to shore up its weakened position, BT last week sold its stakes in Japanese and Spanish mobile-phone operators to rival Vodafone for $6.9 billion. A day later, BT said it would sell its London headquarters building, following that move with an agreement to sell its telecom business in Malaysia for $500 million.

BT also brought in Bland to replace its chairman, Iain Vallance, who had been criticized for the costly acquisitions of third-generation mobile-phone licenses in Britain and Germany and for BT’s plunging stock price.

“This is just the next stage of the transformation of BT,” Chief Executive Peter Bonfield told the British Broadcasting Corp.

Bonfield, who has agreed to a new contract to stay on until at least the end of next year, vowed nothing would stand in the way of the company’s second restructuring plan in six months.

“There are no sacred cows,” he told an analysts’ meeting. “We will deliver on today’s commitments.”

But one insider said it was an open secret that having ousted former finance director Robert Brace and Vallance, BT also was looking for a new chief executive.

Under the new plan, BT Wireless will become a separately quoted company by the end of the year. BT would keep its fixed-line business in Britain along with some smaller operations, renaming them Future BT.

BT hopes to get a large infusion of cash by issuing existing shareholders rights to purchase $8.4 billion in discounted company shares.

In a further effort to raise funds, the company has suspended its March and September dividend payments.

It also plans to sell or spin off to its shareholders Yell, its Yellow Pages business.

On the New York Stock Exchange, BT’s American depositary receipts fell $4.01 to close at $77.64.