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Essay / Research Paper Abstract
This 5 page paper examines the results of the demerger between British Telecom and O2, formerly Cellnet. The paper then considers why the demerger may have been beneficial to both companies and looks at underlying theoretical models that support the actions. The bibliography cites 7 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEBTO2dm.rtf
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Unformatted sample text from the term paper:
are economies of scope and scale there are also diseconomies that may result form a company that is large. Larger companies may be less efficiently, slower to react and create
instability though the diversification in different, even if related sectors. The de-merger of BT and O2, formerly Cellnet, took place on November 19th 2001 (BBC News, 2001). The reasons
behind the de-merger are complex. Cellnet had been seen as a establishing influence on BT. There had been increased debt with the purchase of the third generation licences, which many
believe were overrated when they were purchased. This increased the debt burden and there were fears regarding the way that the poor operating performance of Cellnet would impact on BT.
In the five years before the de-merger the volatility f the BT share price was greater than the average for other similar blue chip companies and the performance of
the FTSE 100. There had been a high price of 1,358.5p and a low of 342p (BBC News, 2001). With the announcement of the de-merger the shares in BT
increased by 10% and the de-merged BT shares were being pre traded the week before the de-merger increased in this market value. The same was not true of the for
the o2 company, trading as MMO2, however this was seen in more volatile terms with speculation that de-merged the company would be weaker and the target of a takeover being
the 6th largest mobile telephone company in Europe (BBC News, 2002). With the results announced on the 19th November 2002 this industry may be seen as understandable, as after improvements
with increased revenue and more customers there was still a loss of ?277 million recorded (BBC Radio 4, 2002). It is also only in this quarter that the company saw
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