In two separate moves that must make Japan Telecom executives wonder what they did wrong, both AT&T (NYSE: T) and British Telecom (NYSE: BTY) announced the sale of their minority stakes in the number-three Japanese telecommunications company to UK-based Vodafone (NYSE: VOD).

AT&T and British Telecom, both former monopoly telecom providers that were at one time considering merging, are motivated to sell stakes in non-core assets to help retire massive amounts of debt. For AT&T's part, the $1.35 billion it will receive will be split with its subsidiary, AT&T Wireless (NYSE: AWE). AT&T bought a 10% stake in Japan Telecom for approximately $600 million in mid-1999, so on the whole it has actually made out quite well on the transaction. But  it is also preparing to split itself into four parts, and is still struggling after a failed acquisition strategy left it with more than $60 billion in debt.

AT&T also was compelled to sell its Japan Telecom stake as a condition of the purchase of 16% of AT&T Wireless by Japanese wireless company NTT DoCoMo (OTC: NTDMY). For all of these reasons -- debt reduction, disposal of non-core assets, and strategic considerations -- AT&T's sale makes sense. That AT&T achieved a net return of 80% in less than two years is a bonus.

Japan Telecom has majority ownership in J-Phone, which provides a competing service, called J-Sky, to DoCoMo's wildly popular i-mode. (i-mode is a means of transmitting short text messages that is very popular in Europe and Japan.) Thus far J-Sky has attracted to date nearly 10 million customers, a 16% share of the Japanese wireless market. In addition, J-Phone expects to release its 3G high bandwidth wireless service in the summer of 2002.

British Telecom, for its part, cannot be happy about its current predicament. BT is walking away from a promising stake in a participant in the world's second-largest telecommunications market. BT is also passing on to Vodafone options it acquired just last month to buy 5% of three regional J-Phone subsidiaries for $550 million. BT's $43 billion debt level has reduced its expansion options, and is forcing the company to take a sharp look at its existing and potential businesses.

This is bound to be embarrassing for BT's management, which fought hard to carve out a place in the Japanese market over the last two years. It is also the first real fallout we have seen as a result of the ruinous prices companies had to pay in order for 3G spectrum auctions in Britain and elsewhere in Europe. By making this sale, BT is essentially yielding its previous goal of being one of the world's dominant wireless players, as its holdings are now largely concentrated in hyper-competitive European markets. Vodafone, on the other hand, has solidified its claim of being the world's largest mobile communications provider.

In the end, AT&T and BT are case studies for what can happen when companies take on unwieldy amounts of debt. AT&T is forced to accept outside ownership for badly needed cash, while BT is being forced to exit certain promising markets and market segments for a greater good: keeping itself solvent.

Bill Mann disavows rumors of a past romantic liaison with the daughter of Rosie O'Grady. His stock holdings can be viewed online, as can the Fool's disclosure policy.