AFTER ONE of the most closely-monitored gestations in corporate history, British Telecom yesterday gave birth to mmO2. And the new baby has a silver spoon in its mouth.
Most mobile phone businesses across Europe and the rest of the world are burdened by vast debts, racked up after the splurge on third generation mobile phone licences. Not so, mmO2. BT Group, a kindly parent, has absorbed most of those costs, and the demerged mobile business has debt of just pounds 500m. Unfortunately, that privilege only partially compensates for the other challenges facing mmO2's new management team.
There is trouble abroad. Viag Interkom, the mmO2 business in Germany, and Telfort, its Dutch operations, are set to be a drain on the group's cash for the foreseeable future. Both are loss-making and neither has critical mass in their market. An expensive rebranding exercise, converting the local names to the new mmO2 brand, is not the answer either. Cost cutting at Cellnet and at Digifone in Ireland is central to short-term earnings growth, but it is pretty thin gruel as a reason for following mmO2 for the long haul. …