BT's Vallance to step down
April 26, 2001
Web posted at: 0858 GMT
LONDON (CNN) -- British Telecom said on Thursday Chairman Iain Vallance will step down, as the company struggles to reduce its debt mountain.
Vallance, 57, and his Chief Executive Peter Bonfield have come under intense pressure to resign as Britain's dominant phone company struggles with mounting debts of £30 billion ($42 billion).
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Christopher Bland, chairman of state broadcaster the British Broadcasting Corp., will step into the position on May 1. Vallance will remain as "president emeritus" until July 2002, when he was scheduled to retire.
"This should give Bonfield a freer reign to implement strategy," James Downie, a telecoms analyst at ABN Amro told CNN. "There has been a difference of opinion (between Vallance and Bonfield)." Bland, who has good political clout, will act more as a chairman, analysts said.
"Vallance was BT through-and-through having spent more than 20 years at the company," he said. Vallance was chairman for the last 15 years and chief executive for about 11 years before the role was handed over to Bonfield five years ago.
New chairman Bland gave his backing to Bonfield saying he was the "right man" for the job.
BT shares decline
Still, BT's (BT-A) stock, which has halved in value over the last year, gave up earlier gains, falling 4.7 percent to 554 pence.
"The market is expecting that in the fullness of time Bonfield is going to have to go as well," a fund manager for an institutional BT shareholder told Reuters. "Bland is probably not the kind of name the market was looking for."
ABN's Downie said attention was now focused on the May 17 when BT outlines its strategy to reduce debt.
The company has several options that include selling its Yell yellow pages directory, the possible sale of its 50 percent stake in Concert, its business services joint venture with AT&T (T: Research, Estimates) of the U.S. and its mobile phone business, Downie said.
The departure of Vallance also opens the door to the possibility of BT tackling its debt problem through a record-breaking £5 billion rights issue, which fund managers said they would back if one or both of the top men at the helm of BT stepped down.
BT, which has debts of about £30 billion largely from buying third-generation, or high-speed, mobile phone network licenses, has said it will cut borrowings by £10 billion by the end of the year
BT paid £5.1 billion to acquire a permit in Germany and about £4.5 billion in the UK. The company also spent another $6 billion on increasing its stake in German mobile phone operator Viag Interkom to 90 percent.
The company is also under threat of having it's credit rating cut by two notches by rating agencies. That would mean BT's interest costs would rise by more than £100 million a year.
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