As big bad AT&T exits stage right, will BT follow?

Bill Gates take note: there's no telling how far down the line an anti-trust suit will come back to haunt you. This week the granddaddy of American telecoms, AT&T, has finally gone and done the US Department of Justice proud by splitting itself into four operations.

Back in 1984, AT&T was battling to keep hold of its comprehensive local telecoms business, but the DoJ forced a spin-off, creating the regional Baby Bells. Sixteen years and a generation of telcos later, AT&T has divided itself into separate broadband, wireless, consumer and business units. All will operate under the AT&T name, but have separate stock listings.

Analysts have responded with uncertainty to the move. Courtney Monroe, telecoms analyst with IDC in New York, explained: "The company is responding to financial analysts' concerns. It's still not clear where it will go or what it will do to turn around strategically."

Ma Bell may be onto something here. Given the sharply downward trend of its stock price - a trend mirrored in that of its partner and UK doppelganger BT - analysts are speculating that a break up may be a sound plan.

David Brown, chairman of analyst house, Schema, said: "Whenever I see a company diversifying, my heart sinks because you know something has gone wrong. But these companies inherited that. These legacy companies have tried to do everything, and they haven't done it all equally well. Size doesn't necessarily work well or efficiently."

Of course BT has already thought of this. The company announced in April that it would reorganise along lines of businesses, and spin-offs are expected.

A BT spokeswoman stressed that the company hopes to float its directory service Yell.com this year, and that other units could follow. "We have already said that we're conducting a strategic review. We will continue to watch our business lines and review them before the end of this year."

BT's wireless business is an obvious spin-off candidate. "The wireless culture is different and the growth potential is different," Schema's Brown points out.

Tony Lavender, principle analyst at Ovum, agrees, "With all the money that has gone into 3G licences, there must be a compelling logic to float the mobile business, if only to raise equity and reduce the debt vulnerability."

Lavender adds that BT should have progressed by now from its announcements in April. He'd like to see flotation announcements about the broadband and internet businesses, as well as BT Ignite, the internet service provision unit.

BT has also been investing heavily abroad to offset the inevitable loss of market share and profit margin in the UK.

And a spokeswoman said its global business joint venture with AT&T - Concert - will stay on track after the break-up. "Both BT and AT&T are continuing talks about how to move Concert forward and how to improve the services we offer to multinationals," she added, but she could not say into which of AT&T's new businesses, if any, Concert will fall.

Financial analysts may be reserving judgement on AT&T's split, but the company has moved decisively towards specialisation. BT has already lost the confidence of many investors, and if it doesn't move quickly, it may not regain it.