Newspaper article The Evening Standard (London, England)

An Argument to Be Avoided as BT Gets into Shape

Newspaper article The Evening Standard (London, England)

An Argument to Be Avoided as BT Gets into Shape

Article excerpt


THE demerger of BT Wireless is stepping up a gear. British Telecom's mobile phones business is scheduled to float offfrom its parent in October and the lead-up to the split begins in earnest next month.

City analysts have been invited to a briefing in early September, the prospectus will be published shortly afterwards and institutions have already been quietly sounded out about the transaction. One of the most sensitive subjects within the deal will be the bonus arrangements for executive directors.

When the technology boom first caught investors' imagination, "ebitda" became the preferred means to measure hi-tech stocks' progress. Earnings before interest, tax, depreciation and amortisation was thought by supporters to reflect companies' true status. Critics felt that stripping out almost every possible negative was an ingenious way of giving the impression of profitability where none existed.

A couple of years ago, the critics could barely be heard. Now they are more vocal and include a nu mber of BT shareholders. These institutions would be reluctant to endorse a bonus package for BT W ireless directors that relied heavily on ebitda targets. They are happy to see executives incentivised but would prefer awards to be based on basic earnings per share growth. This is a rather more prosaic measure but it does at least reflect reality.

BT has been criticised for the way it has run its business and rewarded directors. Chairm a n Sir Christopher Bland h a s implemented a series of m u chneeded changes in the organisation but there is still an enormous amount of w ork to do.

BT W ireless is expected to cut up to 1000 jobs, following the demerger.

BT chief executive Sir Peter Bonfield is also likely to resign after the split. Both moves will please shareholders.

The scale of the Wireless job cuts will, how ever, focus the attention of unions and Government on how directors are remunerated. …

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