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Story URL: http://networks.silicon.com/telecoms/0,39024659,11016972,00.htm

BT restructuring draws mixed reaction

By Lisa Burroughes

Published: Friday 14 April 2000

BT is to separate into wholesale, retail and service-orientated units, in an effort to increase its share value and discourage takeover bids.

Industry analysts have welcomed the reorganisation and believe it will drive competition and lower prices for businesses in the UK.

Bill Mieran, chairman of the Telecoms Users Association, said: "We will be able to see the costs associated with the local loop which at the moment is the biggest hurdle to competition." He added: "This will increase competition for medium sized businesses and consumers, where competition isn't very strong at the moment. By default this will bring prices down."

Clive Longbottom, strategy analyst at CSL consultancy agreed. "I can't see how BT wholesale can keep prices up where they have been for so long. Leased line prices are certain to go down, which will make it affordable to small and medium sized businesses," he said.

However, Longbottom also warned it could leave the telco's wholesale unit wide open to possible takeover bids. "The wholesale unit will be its jewel in the crown and all the major service providers will start looking at it for potential takeover."

Other analysts are also sceptical about the effects of the reorganisation, arguing that old habits will be hard to shake. Carey Gray, research analyst at Butler Group said: "Many BT staff have come from a civil service background and those staff will continue to work in the same way they always have."

John Matthews, principal analyst at Ovum commented: "The greater transparency should help bring costs down. But BT is a large monolithic operation - will it really make much of a difference in the way it operates on a broad level?"