BT considers huge investor payout as directory bills soar

British Telecom is considering launching a multi-billion pound special payout to shareholders later this year. The news emerged as BT revealed that customers would have to pay 40 per cent more to use its directory enquiry service. The increase was criticised by one users' group. Chris Godsmark, Business Correspondent, reports.

BT's senior management, including Sir Peter Bonfield, chief executive, has told City analysts that the group intends to get approval from shareholders to make a buyback at its annual general meeting in July.

Speculation about buybacks helped fuel a 5 per cent surge in BT shares last week, which closed at 502.5p yesterday, up 2p on the day to equal their 12-month peak.

The briefings are the start of a wider campaign by BT to spell out its long-term strategy, following the collapse of its plan to merge with MCI, the US long-distance phones giant. The existing shareholder authority for buybacks expired when BT abandoned its bid for MCI.

A BT spokesman said the group was keeping the issue under review. He continued: "We're not ruling anything out and we're not ruling anything in."

Despite the decision to seek approval for buybacks at the AGM, analysts remain divided about whether BT would press ahead with the move, which could herald a bonanza of some pounds 5bn for shareholders.

Last autumn BT paid out pounds 2.3bn to investors through a 35p-a-share special dividend, announced with its original bid for MCI.

Executives are likely to wait until the group receives $7.5bn (pounds 4.6bn) in cash for its 20 per cent stake in MCI from WorldCom, the US phones group which is bidding $37bn to buy BT's former American merger partner. The deal depends on approval from US regulators, a process which is expected to take several months.

Any buyback would also depend on whether BT found another US partner to replace MCI. Sir Peter has surprised some analysts by suggesting that BT is in "no rush" to launch another US deal.

Sir Peter is also thought to have pointed indirectly to BT's own position as a potential takeover target since the government removed its "golden share" in the group.

One analyst said this looked like an attempt to boost BT's share price when the business was facing increasingly tough competition in the UK and was investing heavily to compete in continental Europe.

Meanwhile yesterday's announcement of a 40 per cent increase in directory enquiry prices will see the cost of a call to the "192" UK service rise from 25p to 35p from 18 February. Calls to the "153" international directory service will increase from 60p to 80p.

BT said the increase was needed to fund its pounds 84m investment programme in the service in the next financial year. The database would be expanded to include mobile, pager and fax numbers by 2000. The service lost pounds 21m in 1996-97 on sales of pounds 115m. The cost of directory enquiry services, which were free until April 1991, was cut from 45p to 25p four years ago.

"Very few residential customers regularly use directory enquiries and they shouldn't be paying for it. This is about fairness, with the people who use the service paying for it," said the spokesman.

About 60 per cent of calls to the service are made by businesses.

But Steve Thorpe, of the Telecommunications Users' Association, described the price hike as "completely unjust." He said: "The customer shouldn't be funding new technology when this is a public service."

At the same time BT is proposing to provide directory information through the Internet for free, with customers paying only the normal cost to their service provider.

Oftel, the watchdog, described the price increase as a "commercial decision" for BT, but warned that it had not been consulted about the Internet enquiry service. "We'll be looking at this very closely to see it there are any data protection problems," said an Oftel spokesman.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Guru Careers: Investment Writer / Stock Picker

Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

Day In a Page

Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue
E L James's book Grey is a reminder of how the phenomenon of the best-seller works

Grey is a reminder of how the phenomenon of the best-seller works

It's hard to understand why so many are buying it – but then best-selling was ever an inexact science, says DJ Taylor
Behind the scenes of the world's most experimental science labs

World's most experimental science labs

The photographer Daniel Stier has spent four years gaining access to some of the world's most curious scientific experiments
It's the stroke of champions - so why is the single-handed backhand on the way out?

Single-handed backhand: on the way out?

If today's young guns wish to elevate themselves to the heights of Sampras, Graf and Federer, it's time to fire up the most thrilling shot in tennis
HMS Saracen: Meeting the last survivor of a submarine found 72 years after it was scuttled

HMS Saracen

Meeting the last survivor of a submarine found 72 years after it was scuttled
7/7 bombings 10 years on: Martine Wright lost both legs in the attack – she explains how her experience since shows 'anything is possible'

7/7 bombings 10 years on

Martine Wright lost both legs in the attack – she explains how her experience since shows 'anything is possible'