BT's half-time profits leap by 50% to pounds 1.5bn: Vallance warns of tough times to come with regulator and competition

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BT INCREASED taxable profits by almost 50 per cent to pounds 1.5bn in the first half of the year, from pounds 1.03bn a year ago. The increase reflected a reduction in redundancy costs and the effects of disposals in the comparable periods. Underlying growth was 2.5 per cent, writes Mary Fagan.

Iain Vallance, BT's chairman, said demand for services had been strong in the first six months, with inland call volumes up by 3 per cent on a 12-month moving average. The increase was gratifying for those who see call volumes as a bellwether for the health of the UK economy as a whole, he said. On a 12-month average, international call volumes also grew strongly, by 7 per cent.

But Mr Vallance warned that BT faced more competition and tightening regulatory control across the board. The new price control formula limiting BT's price increases to inflation minus 7.5 percentage points would affect results in the second half, he said.

BT's turnover in the first six months grew to pounds 6.7bn from pounds 6.5bn a year earlier and earnings per share rose to 15.6p from 10.1p. The interim dividend of 6.65p represents an increase of 8.1 per cent, but Mr Vallance said that future dividend policy would have to take into account the effects of regulation and competition as well as low inflation and emerging investment needs.

The company said that changes in North America, where telecommunications companies are forging alliances with media and cable television companies, would inevitably have an impact in the UK. Mr Vallance said BT would have to tackle the need to provide entertainment services, which would have implications for investment plans.

The company's licence limits its ability to provide entertainment, and Mr Vallance said: 'The Government will have to look carefully at whether it makes sense to have large foreign-owned companies competing with BT on favourable terms.'

BT's share price fell by 9p to close at 467.5p. The partly-paid shares fell by 10p to 217.5p.

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