BT to axe 12,000 more jobs

TELECOM: Final round of cuts at end of 'a demoralising tunnel'

BY MARY FAGAN

Industrial Correspondent

BT is to cut about 12,000 jobs over the next 18 months in the final round of its nation-wide redundancy schemes. The cuts are in addition to higher-than-expected losses of 16,500 in the year to 31 March, mainly from management.

The next wave of reductions, expected to be announced next week, will mean that BT has trimmed its workforce to around 120,000 from 244,000 in 1989. The cost to the company has already been about £2.4bn.

It is expected that job losses will continue at a local level, but the numbers going each year will be much smaller than has recently been the case. BT declined to comment on the latest 12,000 job cuts. One industry source said: "There is relief that we have seen the light at the end of a long and demoralising tunnel." City analysts expect BT to reveal a pre-tax profit of about £2.5bn to £2.6bn after redundancy charges in excess of £750m, compared with £2.8bn the previous year. The dividend is forecast to increase by about 6 per cent from last year's 16.7p, reflecting growth in underlying earnings.

News of further rationalisation will be welcomed by those in BT who believe the company has yet to reach the levels of productivity it needs. In terms of number of lines it operates per employee - a key measure of efficiency - BT has 190 compared with 250 for the regional Bell operating companies in the US. Other European operators such as Telecom Italia and the Dutch PTT have between 200 to 250.

One City analyst said: "They have a way to go to achieve really world- class efficiency."

BT still has about 90 per cent of the overall telecommunications market, but its share of business segment has fallen to about 75 per cent. The company faces increasing competition from niche players including MFS and Colt in the City of London and from cable television companies.

BT is also likely to warn next week of the threat of increasing regulation from Oftel, the watchdog body. The company is already in the throes of an enquiry by the Monopolies and Mergers Commission because it refused to pay for introduction of number portability, which will allow customers to keep their numbers if they switch to another operator.

Oftel regards number portability as vital to competitiongrowth. BT fears it will shoulder a large part of the cost.

Oftel is also due this summer to publish results of a wide-ranging consultation on the future of the industry - including regulation of BT prices. It is thought that Don Cruickshank, director general of Oftel, is keen to abolish a cap which limits BT's line rentals to inflation plus two percentage points.

However, BT may also lose payments from other operators which help cover losses in the local networks of more than £1bn a year. The company also fears the regulator may take on more powers, allowing for more intrusion in its day-to-day operations than in the past.