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BT denies sell-off rumors

Reports that British Telecommunications may accept a multibillion-dollar bid for its entire fixed-line telephony network are strongly denied by the company.

By Graeme Wearden

Rumors that British Telecommunications might accept a multibillion-dollar bid for its entire fixed-line telephony network were strongly denied by the company on Monday.

A company representative said BT wouldn't even consider such a move. "There is no truth in this idea. The fixed-line network is a core asset, and there is no way that we would sell it."

A report in last weekend's edition of The Observer claimed that incoming Chief Executive Ben Verwaayen was considering splitting BT by selling off the fixed-line telephone network--often referred to as the company's crown jewel.

German bank WestLB recently offered BT nearly $36 billion (?25bn) for its fixed-line network--including the network backbone and local exchanges.

The bid was turned down, as was an $11.5 billion offer for just BT's local exchanges from financial consortium Earthlease.

Some experts believe that splitting BT could provide a boost to the availability of broadband services in the United Kingdom.

If successful, both Earthlease and WestLB would lease network capacity back to BT, and also to rival operators. Under local loop unbundling (LLU), telecom companies can place their telecommunications equipment in a BT exchange and sell services to Internet service providers or directly to customers.

However, LLU has been very slow to take off. BT claims that the slump in the telecommunications market has made it harder for LLU operators to raise the money needed to cover installation costs--which in some cases can cost as much as $115,000 just to install equipment in one exchange.

According to some observers, if a third party owned the network, then it might be more economical for rival operators to gain network capacity and offer wholesale telecommunication services in competition with BT.

One BT executive said that such a model could make more sense than LLU. "Rather than letting them install their own kit alongside our equipment, why not just let them share the network?" he said.

BT's official stance, however, is that such a move is not in the cards.

Late last year, BT applied for a broadcasting license--leading to suggestions that the company was set for a multimedia future.

Staff writer Graeme Wearden reported from London.