Newspaper article The Evening Standard (London, England)

BT Demerger Provides Oxygen for Speculators; Spread Betting

Newspaper article The Evening Standard (London, England)

BT Demerger Provides Oxygen for Speculators; Spread Betting

Article excerpt


TAKEOVER bids and flotations may be few and far between these days, but at least the London market has a giant demerger to keep corporate financiers and analysts occupied this autumn. The multibillion pound separation of the strangely named mobile phones business mmO2 from its parent, BT, also provides an opportunity for speculators - thanks to spread betting. City opinion is so divided on the attractions of mmO2, headed by chief executive Peter Erskine, that some analysts have estimated its value as low as [pound]8 billion, and others as high as [pound]15 billion.

Bookmaker City Index started to quote a grey market spread for mmO2 on Monday, and yesterday this was at 133-138p per mmO2 share - implying a market capitalisation for the new company of some [pound]11.5 billion.

Other bookies such as Cantor Index are expected to follow suit with their own spreads soon. Bets are due to expire at the close on 19 November, the first day of official trading in the shares. Between now and then, spreads will be buffeted by swings in sentiment.

The last big demerger, that of Woolworths from Kingfisher in August, saw the Woollies grey market spread rise as high as 33-35 and fall as low as 22-24, before expiring at 33.75p. The key influences on the mmO2 spread in the next few weeks are likely to be the military situation in Afghanistan, and investors' attitude towards the battered telecoms sector.

Since the terrorist attacks on the US on 11 September, telecoms stocks have performed quite well, with BT holding firm at about 350p and Vodafone rising 10%.

One reason has been a view that if people in the West travel less frequently by plane, they will use the phone more.

Bulls of mmO2 will also point out that the BT offshoot will start with much lower borrowings than its rivals, at [pound]500 million. Bears will cite the up to [pound]8 billion of capital spending the company is likely to incur in the next five years, as it builds up its wide range of mobile interests, including Cellnet in Britain, Viag in Germany, Telfort in the Netherlands and Esat in Ireland. …

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