BT chief: Growth demands acquisitions

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Sir Michael Rake, chairman designate of BT, said on Tuesday that he was willing to look at the case for increasing gearing at the UK’s leading telecoms group to fund future acquisitions.

In his first interview since BT announced on Monday that he would become chairman in September, Sir Michael predicted the group would make more acquisitions to cater for the telecom and IT needs of multinationals.

BT Global Services, the division that provides communications networks and related IT to multinationals, has become an important growth engine for the group.

Sir Michael said he wanted BT to be regarded as one of the top three telecoms groups in the world by 2010, particularly in the areas where the global services division was competing.

BT is a leading player in supplying multinationals with voice and data networks, but in related IT it has been trailing companies such as IBM.

“BT, in terms of its global services division, is becoming bigger and bigger,” said Sir Michael, who is currently international chairman of KPMG, the accounting firm.

“That is something I will pay a lot of attention to with Ben [Verwaayen, BT chief executive] in terms of trying to make sure, as BT grows and makes acquisitions and assimilates companies, we do it in a way that really works.” While he stressed he had reached no conclusions on strategy, he said he was willing to consider the case for increasing gearing to fund acquisitions.

“I think when you have got a very credible management who have a track record in an extremely dynamic area, it strikes me most shareholders will want to give them the tools and the opportunities to go and make something of this,” Sir Michael said.

He said higher borrowing could be appropriate “if that fits the strategy of BT and fits the particular circumstances of the acquisition”. He also described BT as “highly bankable”. “I have satisfied myself in my own personal due diligence that the company is not over geared,” he said.

BT is currently considering the case for increasing gearing, and may reach some conclusions by the time of its 2006-07 results, due in May. Net debt stood at £8.8bn at December 31.

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