Government abandons BT golden share
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Your support makes all the difference.The Government yesterday removed one of the obstacles to British Telecom's $20bn (pounds 12bn) merger with MCI by abandoning its golden share in BT which protected the company from takeover.
The announcement, on the eve of BT's annual shareholders meeting in Edinburgh today, will ease the path for regulatory approval of the deal in the US.
But the merger is still hanging by a thread following MCI's shock profits warning late last week which has forced BT to choose between renegotiating the terms of the deal or pulling out altogether.
BT is set to receive a rough ride today from shareholders demanding to know why the profits warning emerged after both sets of investors had approved the merger.
MCI president Timothy Rice, one of the executives blamed for the profit warning, said in Washington yesterday that it was "going straight ahead'' with the merger despite facing losses of $800m this year and $1bn next year on its attempt to break into the US local telephone market.
He declined to say whether the merger would have to be restructured because of the losses. He also responded to suggestions that BT wanted him removed from MCI because of the profit warning by saying he expected to be running MCI for a "long" time.
The decision by Margaret Beckett, President of the Board of Trade to end the golden share was welcomed by BT. The "golden share" prevented any single shareholder from owning more than 15 per cent of BT, thus making it bid-proof. BT's competitors in the US argued that this left the UK telecoms market less open and therefore US regulators had to block the MCI deal.
"We are extremely pleased with the Government decision and the speed with which they've acted," a BT spokeswoman said. She said negotiations initiated with the previous government had been resumed with the Labour administration soon after the election.
She said the Government's action "makes it clear to other operators and foreign governments that BT operates in a normal competitive environment and has disengaged itself from the last trace of formal government control".
The redemption means that the ban on BT having a foreign chief executive or chairman is lifted and the Government no longer has power to veto any changes to the company's articles of association.
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