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It wasn’t so much that the market didn’t believe him when he said the BT Wireless IPO was still on track for the second half of this year or that it would be the biggest chunk of the group’s planned debt reduction programme of £10bn. Rather, it is that the market is beginning to doubt whether this really is the right approach, and if it is not, then what on earth is?
Everything has its price, and even BT Wireless could be sold if the valuation were low enough. But there comes a point where such a sale would be destructive of shareholder value, rather than adding to it, and the figures yesterday gave no reason to believe post the Orange debacle that anything like fair value will be achieved. Cut through the headlines and say ta ta to Ebitda – the modern, New Economy way of restating losses as profits – and the results paint a very worrying picture.Basically they show that it is the old and solid, core, monopoly network business that is continuing to generate all the profit while the newer businesses on which BT is pinning its hopes for the future – BTopenworld, BT Wireless, Concert and BT Ignite – are gobbling up money like there’s no tomorrow. What’s more, in operational terms too most of these businesses fail to compare favourably with peer groups. Margins at BT Wireless during the Christmas quarter more than halved as the company threw caution to the wind and slashed prices to see off the Orange challenge to the number two slot in the UK market. This, it ought to be pointed out, was a complete reversal of what Cellnet said it would do as recently as last September.Sir Peter says that the downgrade in the Orange valuation doesn’t bother him because BT has always been much more conservative in its view of what mobile assets are worth But hold on a moment there.

One of the reasons BT is groaning under such a mountain of debt is that it has just spent £8.5bn consolidating its position in Germany’s still nascent Viag Interkom and more than £4bn on a 3G licence in the UK. This is not a conservative view of the value of mobile assets.The general assumption is that BT has to sell the planned 25 per cent of BT Wireless in order to safeguard its A grade credit rating and prevent its cost of capital rising precipitously. This is also the presumption that Sir Peter is working to in sticking so doggedly to plan. The damage to profits from rocketing debt interest payments is already apparent from the last quarter’s results. BT did as much as it could to confuse the situation in the way it reported its results yesterday, but the underlying picture is that interest payments tripled, more than halving pre-tax profits (Forget about Ebitda. Real profits are only generated after payment of interest, tax and depreciation of assets.)The arrival as finance director of Philip Hampton, the man credited with transforming British Gas from public service utility into an organisation run for the purpose of shareholder value, has done much to calm nerves, internally and externally Many already see him as the next chief executive. But even he candidly admits he has never come across an organisation in the grip of so much radical change, both to the nature of its business and to its structure.

The way forward is still far from clear, but it may be that he will have to find alternative ways of reducing the debt mountain than a flotation of BT Wireless.Interest rate cutIs the Monetary Policy Committee really necessary? This might seem an odd question to pose the day after it has endeared itself to everybody by cutting interest rates for the first time in a year and a half. But it is a question raised by the committee’s recent inactivity – yesterday’s decision was the first time rates had moved at all since last February – and by the fact that the financial markets expect only another two quarter-point cuts by the end of this year.Just imagine the excitement the committee members must have felt this week: at last, something to boast to the neighbours about over a glass of sweet sherry (or dry Martini in Sir Edward George’s case) at the weekend. “Yes, it has been a quiet year or two at the office, but we did reduce your mortgage by a tenner a month this week.”Of course, the variability of interest rates has been subdued ever since they shot up to 12 per cent in the dark days of September 1992. Since 1994 the biggest peak-to-trough range for base rates has been just 2.5 percentage points. Even so, a drop of just 0.75 points, if that is all that does turn out to be needed this time, would be astonishingly small.So small, in fact, that it is debatable whether it would have any significant impact on inflation and growth at all. Given the margins of error in forecasting the economy two years ahead, there is a strong case for arguing that rates should be left at 5.5 per cent in perpetuity, the level most economists would accept as “neutral” for the British economy.Unfortunately, it’s probably premature for the MPC’s nine members to start thinking about making themselves redundant.