BT should split its retail, network and research sectors in four
years’ time, according to analyst group Forrester. In a report
published yesterday, Forrester estimates that a full break-up of BT
by 2006 could unleash £11 billion more value for the company’s
shareholders.
The report claims that BT’s current structure as four main
horizontal lines, business- wholesale, Ignite, openworld and
retail, is the first step toward a new industry paradigm that
Forrester calls "layered telecom" and has already-manifested
benefits that could deliver £10 billion in present value terms.
Forrester believes, however, that BT’s strategy will soon reach
the limits of what internal layering can deliver.
Senior analyst Lars Godell said: “In 2006 a break-up - a
separate listing of BT's retail, innovation, and network businesses
- will be seen as a natural evolution, not revolution inside BT.”
He added that the newly independent business units would
“concentrate on innovation, deliver higher revenues and lower
cost.”
The report also points out that a break-up strategy has
significant risks that could cost BT more than £5 billion in a
worst-case scenario.
Finally, Forrester warns that European regulators could “easily
wipe out most of the expected break-up benefits if they were to
mandate break-ups of BT and other incumbent telcos”, and recommends
that “regulators must encourage voluntary structural separation by
granting incumbents that break up on their own terms full relief
from their industry-specific regulatory burden."
