Cost of job cuts leaves BT profits flat

BT unveiled flat first-quarter profits yesterday, but gave little away about its continuing dispute with the industry regulator, Oftel, over the proposed measure to ban anti-competitive behaviour.

Pre-tax profits fell by 0.6 per cent to pounds 869m in the three months to the end of June, although the decline was due to an increase in redundancy payments in the quarter, from pounds 22m to pounds 55m.

BT also pointed out that the 4 per cent rise in its turnover, to pounds 3.64bn, came after price cuts during the year which totalled pounds 132m. Robert Brace, finance director, said that, excluding these, the underlying increase in turnover was around 8 per cent. The price cuts knocked 3.7 per cent off sales of international calls. Sales of new services were more promising, however, with mobile turnover increasing in the quarter by 24 per cent.

Sir Iain Vallance, chairman, said: "BT has demonstrated its continuing resilience as well as the ability to succeed in an increasingly competitive environment."

But competition continued to hit BT's domestic business, reducing the number of residential customers by 30,000. Mr Brace said about 50,000 homes a month are switching to the cable operators, though at the same time BT is signing up around 40,000 new domestic customers, resulting in a net monthly loss of 10,000.

He said: "We are facing really tough competition, but I think on service and price we are proving that we are very competitive."

The results also disclosed that just under 1,000 staff took voluntary redundancy over the period, with payouts averaging pounds 52,000. Employees continue to leave BT at a rate of 8,000 a year, unchanged from 1995.

Asked about the dispute with Oftel, Mr Brace said the BT board had met on Tuesday to discuss the situation and had "reached some decisions".