BT 2001 Annual Report Download - page 59

or that we will achieve all of our strategic goals. Failure in this
regard could adversely a¡ect our strategic and competitive
position.
We need to obtain a number of consents, approvals and/or
clearances before we can demerge BT Wireless. At this
stage, we cannot be certain that we will obtain these on
acceptable terms or within our proposed timetable.
For the BT Wireless demerger to proceed as planned, we
need ¢rst to obtain consents, approvals and/or clearances from:
our shareholders; the High Court of Justice in England and
Wales; the Department of Trade and Industry; the Inland
Revenue; and certain regulators.
We expect to seek shareholder approval at an
extraordinary general meeting to be held towards the end of
2001. Our current intention is that the demerger of BT Wireless
will take place at the same time as the creation of a new
holding company which would be undertaken through a court
approved scheme of arrangement.
The trustee of certain of BT’s notes and bonds has
con¢rmed, having taken independent legal and ¢nancial advice,
that, subject to certain conditions being met, it will not take
any steps in relation to the demerger of BT Wireless. The
principal condition is the successful completion of the rights
issue; other conditions include the information provided by us
to the trustee remains accurate and no new and materially
adverse factor emerges. Further certi¢cation will be required by
the trustee prior to implementation of the demerger. There can
be no guarantee that this certi¢cation will be obtained.
We can give no assurance that the rights issue will be
deemed successful by the trustee or that we will be able to
obtain the necessary consents, approvals and/or clearances and
consequently that we will be able to implement the demerger of
BT Wireless.
We have asked the Department of Trade and Industry to
con¢rm our expectation that our main telecommunications
licence, the BT Cellnet licence, and our 3G licence will remain
in e¡ect after the demerger. There are also a number of non-UK
licences, including those for Viag Interkom and Esat Digifone
for which consent or noti¢cation will be required. We will
require certain clearances from the UK Inland Revenue to
con¢rm the tax treatment of the companies involved in the
demerger and for our shareholders on demerger.
We are facing significant competition in the markets in
which BT Wireless operates, which may reduce our
revenues and profitability.
There is intense competition in all of the markets in which
BT Wireless operates. BT Wireless is competing with leading
global wireless operators as well as virtual network operators,
traditional ¢xed line providers, resellers of wireless services
and cable operators. In many countries new competitors may
also enter into their markets as additional bands of spectrum
and licences for wireless communications may be auctioned or
otherwise o¡ered or sold by the governmental authorities.
We expect that recent market trends in the
telecommunications industry, such as accelerating technological
convergence, will also intensify competition in all existing
markets, both from existing competitors and new entrants.
Continuing competition has and may lead to: price erosion on
products and services; reduction in market share; loss of
existing or prospective customers and increased di⁄culty in
retaining customers; increases in handset subsidies; faster
network expansion and upgrading; and more rapid development
of wireless technologies.
BT Wireless’s competitive position will depend also on the
e⁄ciency and success of marketing and branding initiatives
and its ability to anticipate and respond to various competitive
factors a¡ecting it, its competitors and its industry. Such
competitive factors include, amongst other things, new services
and products, network coverage, pricing of wireless services
and handsets, the quality of customer service and changes in
consumer preferences.
Any failure by BT Wireless to compete e¡ectively or
successful competitive behaviour by its competitors would have
a material adverse e¡ect on our operating results and prospects
for so long as BT Wireless remains within the group.
If our subsidiary Viag Interkom continues to incur losses,
we may not realise a return on our investment.
We have invested approximately »12 billion, mainly in the
2001 ¢nancial year, in Viag Interkom, our newly acquired
subsidiary business in Germany against which a goodwill
impairment charge of »3 billion was made in the year to
31 March 2001. Viag Interkom, a startup established in 1997,
has incurred losses in each of its completed ¢nancial years.
Viag Interkom has an estimated 7% share in the highly
competitive German mobile phone market as at 31 March 2001.
Under a licence it acquired in 2000, Viag Interkom is required
to develop a 3G mobile network in Germany. Although the
development of a 3G mobile network will require substantial
capital expenditure by Viag Interkom, we cannot be certain
that the demand for 3G mobile products and services will
justify the related costs or that Viag Interkom will develop a
competitive 3G network. We have not managed a similar sized
operation outside the United Kingdom in recent years. We can
give our shareholders no assurance that Viag Interkom will
cease incurring losses in the foreseeable future, nor that we will
BT Annual report and Form 20-F 59