Company Of The Week

BRITISH TELECOM said third-quarter profit rose 13 per cent, on soaring demand for cellular, internet and data services. BT shares rose 11 per cent on Thursday, their biggest one-day gain ever. Profit from operations for the three months to 31 December rose to pounds 601m, from pounds 532m a year earlier.

Strong data and mobile demand allayed concern that BT's earnings will suffer as the British economy slows and rivals encroach on its traditional fixed-line business. BT is spending about pounds 1bn annually to ensure its lines can handle demand for internet and data services; a market it expects to grow more than 150 per cent in the next five years.

"BT's fibre-optic network in Europe and growth in data services means that they are in the growth arena with the likes of Vodafone," said Nigel Thomas, a fund manager at ABN Amro Asset Management. "Profit forecasts for the full year will probably go up by about 5 per cent."

Higher internet and data traffic lifted BT's UK call revenues 6.5 per cent, to pounds 1.3bn, in the third quarter. BT said 15 per cent of local calls were to connect to the internet, up from 7 per cent a year earlier. The company said it will start a free internet access service in the UK. It also aims to lure more data traffic from lucrative multinational customers with its planned international alliance with AT&T of the US.

Sales, including contributions from joint ventures, rose to pounds 4.68bn, from pounds 4.083bn. Pre-tax profit beat analysts' expectations, rising 16.5 per cent, to pounds 858m. The rise in operating costs was limited to 7 per cent.

"Our view last year was that the economy was slowing, and we took appropriate action," a BT spokesman said. "The telecommunications business is a healthy one, and if you manage yourself properly you can do well, even in a slowing economy."

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