Esat Digifone may be floated as part of a pan-European or global wireless business to raise money for British Telecom, which is facing a massive debt burden of almost £30 billion sterling.
The board of BT will meet next week to discuss spinning off its mobile units and other assets in an attempt to reduce gearing, which will rise to 180 per cent after its 3G licence victory in Germany at a cost of €8.5 billion.
If the board decides to spin off its mobile units, it is likely to amalgamate its eight European mobile operations and possibly its Japanese mobile operator into one business unit rather than spinning them off separately.
"It doesn't make sense to strip off one piece and float it separately," said Ms Una McGirr, director of communications at BT Europe.
However, she said no decision had yet been taken on the best way to raise cash to cancel the debt. She said this could take the form of a disposal of non-core assets or an IPO strategy for separate business units.
Any decision to float off Digifone as part of a separate business unit would probably result in corporate rebranding and the loss of one of the Republic's most successful brand names, according to telecoms experts.
"Esat Digifone's identity would go, as there would have to be a new brand. It would be unlikely that there would be an alliance structure as there is in the airline industry," according to telecoms specialist Dr Chris Doyle, vice-president at Charles River Associates.
"But Digifone would benefit from any merger because of the huge sums which are involved in rolling out 3G networks around Europe," he said. "The future for small players is bleak."
Esat Digifone joined BT's growing European mobile family earlier this year when Esat Telecom was purchased for $2.5 billion. BT now owns or holds significant stakes in Viag Interkom in German, Blu in Italy, SFR in France and Telfer in the Netherlands.
A spin-off of the group's mobile unit would raise billions of dollars and go some way to reducing BT's growing debt mountain.
This includes a €7.3 billion price tag that it accepted earlier this week to double its stake in German mobile phone operator Viag Interkom to 90 per cent. The group also owes some €8.5 billion for a German 3G licence and more than £4 billion sterling for a UK 3G licence.
It is not thought that the 49.5 per cent stake held by Norwegian mobile phone operator Telenor in Digifone would impede any plans by BT to include the operator in any pan-European IPO strategy.
Neither Esat Telecom nor Esat Digifone have commented on the matter.
Meanwhile, it was reported yesterday that BT was in discussions with AT&T about a possible merger. The report were later dismissed as "speculation" by a BT spokesperson.
