According to some financial media sources BT Group PLC has started talks to sell off a stake in its broadband infrastructure arm Openreach to institutional investors, according to a report this morning.
The telecoms group needs cash to roll-out of a rapid fibre network infrastructure across the country and to fund a huge pension fund liability and a sale of part of Openreach would go some way towards that.
Last week BT cancelled any dividends until 2022 saving itself £2.5bn, but the network upgrade is expected to cost £12bn while the telco also faces a £50bn pension liability and has net debt of £18bn.
Over the past three weeks, BT has held talks with Australian bank Macquarie and several sovereign wealth funds, according to the FT citing three unattributable sources.
Openreach has been valued at around £20bn in the discussions according to the newspaper, which is double what the whole BT group is worth currently.
The shares have fallen to their lowest level since 2009 due to concerns over its financial health, which is likely to come under more pressure from the merger of mobile group 02 with rival broadband provider Virgin Media.
BT has up to now resisted pressure to divest Openreach, but was forced to set it up as a separate legal entity within the company by the regulator after complaints by rivals such as Virgin Media.
The value of broadband infrastructure has also soared with the surge in the use of the internet and data transmission.
The slow speed of Britain’s network prompted Labour to threaten to re-nationalise Openreach and invest heavily in the upgrade.
Philip Jansen, BT’s chief executive, bought £2mln worth of shares in BT yesterday alongside hefty purchases by other members of the board including chairman Jan Du Plessis.
© Proactive Investers
BT Group has told Openreach staff that the division is not sale, contrary to a report that the firm is talks with potential buyers. Openreach CEO Clive Selley said in a message to staff: “Many of you will have seen the reports overnight about BT being in talks to sell a stake in Openreach.
“I spoke to (BT CEO) Philip Jansen last night after the story broke in the newspapers. He is very clear – the story is inaccurate. Openreach is staying in the BT Group.” There was speculation that a sale would help BT finance a planned £12 billion upgrade of its broadband network.
Potential buyers were named as Australian bank Macquarie Group and a sovereign wealth fund, who were said to have held talks with the company, according to the Financial Times.
Openreach, which maintains BT’s broadband network, is also used by a host of commercial rivals such as Sky and Talk Talk on a wholesale basis.
It is the most profitable division within BT and could be valued at about £20bn. Ofcom ordered BT to legally separate Openreach from the rest of its business in 2017.