BT has suffered a double blow to its debt-cutting plan after new competition controls threatened the sale of its Yellow Pages unit and a credit rating cut pushed up its interest payments.
Would-be bidders are reconsidering the price they are prepared to pay for Yell, the division that publishes BT's business directories, after British competition regulators ordered a cut in its advertising rates, a banker involved in the talks said. Another source said that the deal itself could be at risk.
A failure to complete the sale would undermine BT's plan to raise £5.9 billionfrom its shareholders in a record rights issue and jeopardises its ability to further cut its crippling debt load.
BT was set to raise up to £3 billion pounds by selling Yell.
But a person involved in the talks said an Office of Fair Trading (OFT) announcement on Friday imposing new price controls on the business could slash the value of Yell by one billion pounds.
Bankers involved in the talks said, however, they still expected a sale to go through early next week, albeit at a reduced price. They said a cut of £1 billionwas excessive, and that Apax/Hicks was not the only bidder.
BT shares were down 1.7 per cent at 519p, well above the heavily discounted rights issue price of 300p.