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BT to sell Japan assets

May 1, 2001
Web posted at: 1435 GMT

LONDON (CNN) -- British Telecom is in talks to sell its stakes in Japan Telecom, J-Phone and Airtel Movil to rival Vodafone to reduce its huge debt.

BT, struggling with debts of £30 billion ($43 billion), could end up selling its 20 percent stakes in Japan Telecom and J-Phone and its 17.8 percent stake in Airtel for some £4 billion, according to analysts' estimates.

"Talks are at an advanced stage," BT spokesman Mike Bartlett told CNN Tuesday. The company declined to discuss financial details.

Vodafone, which already has a 25 percent holding in Japan Telecom, is also in talks to buy BT's stake in Airtel Movil, Spain's second-largest mobile-phone operator, BT and Vodafone said. Vodafone already owns 73 percent of Airtel Movil.

The latest talks come less than a week after Iain Vallance resigned as BT chairman. He and CEO Peter Bonfield had faced calls to step down after the company spent billions attempting to build a foothold in the cellular market.

BT obtained options last month from Japan Telecom allowing it to increase its stake in that company's three regional mobile phone companies for ¥68 billion yen ($555 million).

BT, together with U.S. phone operator AT&T (T: Research, Estimates), has invested £1.2 billion in Japan Telecom.

Vodafone buying spree

The deal would leave Vodafone with an effective stake of about 55 percent in the J-Phone operating companies, but it will not have control of J-Phone due to the ownership structure of the Japanese operator, Mark James, an analyst at Nomura, wrote in a research note.

"We are supportive of the transaction because it moves Vodafone closer to taking control of what we believe to be an undervalued operator in a key market," James wrote.

"But we should highlight here that even assuming this purchase takes

place, the final deal to seize control of J-Phone still needs to be done," James said. He has a "hold" recommendation on Vodafone.

J-Phone, a holding company, is owned 54 percent by Japan Telecom, 26 percent by Vodafone and 20 percent by BT.

For Vodafone, the Japanese market – the world's second-largest telecom market -- represents an important test bed for new high-speed mobile phones, which would offer video and internet access.

The acquisition would ratchet up the competition between NTT DoCoMo, Japan's dominant mobile phone company, and J-Phone.

The announcement of talks comes on the day BT's new chairman, Christopher Bland, starts his new job and is a blow to Bonfield, who has staked his reputation on the Japanese investment, analysts said.

A deal, if completed, would mark Vodafone's third acquisition of a stake in Japan Telecom since December of last year.

Vodafone completed its latest deal Monday with AT&T to buy its 10 percent of Japan Telecom for $1.35 billion.

Shares in British Telecom (BT-A) rose 4.9 percent to 587.5 pence and Vodafone (VOD) fell 2.7 percent to 206.5 pence in afternoon London trade Tuesday. Japan Telecom shares ended up 8.7 percent at ¥2.24 million.

-- from staff and wire reports