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BBC plans £100m sell off of profitable technology arm

LONDON – The BBC could save £20m-£30m a year if it goes ahead with plans to sell off of its technology arm, BBC Technology, which could raise £100m.

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The radical sell-off plan, which will see 1,400 staff join the private sector, follows a strategic review of the BBC's technology requirements for the next decade, and comes ahead of the crucial review of the BBC's charter in 2006.

The announcement comes as Roger Flynn, chief executive of BBC Ventures Group and a member of the BBC's executive committee, announced his plans to leave the BBC in the Spring of 2004.

There had been speculation that the sale would be the first of several, threatening the possible future of BBC Ventures Group. However BBC director-general Greg Dyke said there were no "plans to sell any other of our commercial subsidiaries".

The BBC is hoping that the sale will raise more than £100m. BBC Technology last year delivered profits and price reductions of £19m to the corporation.

The £20m-£30m annual cost saving will come from outsourcing its technology requirements, which are currently handled by BBC Technology. As well as handling BBC work, the company has won important contracts in the UK and abroad with clients such as Hutchison 3G, US sports channel ESPN, Rupert Murdoch's DirecTV and US National Public Radio.

The BBC said in a statement that by combining the procurement process with the sale of BBC Technology, it will be able to gain maximum value and, as a result, invest more money in its programmes and services.

A number of bidders are already thought to have shown interest in buying BBC Technology, including IT giants IBM and EDS and telecoms giant BT, which is chaired by former BBC chairman Sir Christopher Bland.

The sale plan has its roots in the government's decision three years ago to agree current BBC funding levels, when the corporation was also told it must raise £1bn over seven years.

According to Dyke: "When we were given our current funding agreement in the year 2000 by Chris Smith, the then secretary of state for culture, media and sport, he made it a condition that we raised an additional £1bn over the next seven years. He suggested one way of contributing to that was to sell a BBC asset. This is what is now planned."

There are concerns that hundreds of jobs could be lost when BBC Technology enters the private sector, but Dyke reassured the 1,400 staff transferring and said that the move would benefit both staff and the BBC.

"While some BBC Technology staff will inevitably feel worried about the prospect of change we've reached the conclusion that this is a win/win situation for the BBC and the staff. This way the staff will continue working on BBC business but at the same time BBC Technology, which has been very successful at winning outside contracts, will get the capital injection it needs to expand further, albeit in someone else's ownership, " Dyke said.

The BBC's governors have already approved the sale and procurement, but it will now need the go ahead from culture secretary Tessa Jowell.

BBC Technology was created in 2001 and is one of five BBC commercial business, which also include BBC Resources and BBC Broadcast.

The review conducted by the BBC concluded that the sell-off was the best option when after it concluded that for the subsidiary to be competitive further rationalisation would be needed, which would have resulted in substantial job losses.

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