BT to shed jobs in £850m savings drive at retail arm

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British Telecom yesterday confirmed plans to cut a further 3,500 jobs in its retail division next year as part of a cost-cutting plan designed to save £850m.

The job losses are in addition to 9,500 already achieved since the beginning of last year and will reduce the workforce of BT Retail to about 55,000 by March 2003, of which about 20 per cent will be contract staff.

Pierre Danon, the chief executive of BT Retail, stressed that none of the job cuts were new but part of a rolling programme designed to improve the efficiency of the business. "I feel our transformation can be illustrated best by the analogy of BT changing from a ponderous Sumo wrestler into a lean and agile Samurai swordsman," said Mr Danon. "By making this change BT will finally break its losing streak."

He also announced that BT Retail's target would be to increase revenues at a compound rate of 3 per cent a year from the current level of £11.8bn.

The new cost reduction and growth targets came as BT announced a new package of unmetered tariffs for its fixed-line business. The new packages include a tariff of £18.50 a month, including line rental, for unlimited evening and weekend calls to UK numbers. There is also a £23.50 tariff which offers unlimited UK calls plus free weekend and evening internet access.

Meanwhile shareholders in Blu, the loss-making Italian mobile operator in which BT has a 20 per cent stake, are today holding a board meeting to discuss it's funding needs.

The meeting, in Rome, will determine Blu's fate at a time when all its shareholders are eager to sell their stakes.

It also comes less than a week after reports in the Italian press that Blu lost 332m euros (£208m) in the first nine months of the year on revenues of 223m euros.

BT has confirmed it will continue to fund its share of Blu's losses, but it has made no secret of its desire to reduce its ongoing funding commitment. Sources familiar with the situation said the views of Blu's other shareholders on the issue of funding differ markedly.

When BT delivered its second-quarter results last Thursday, it estimated that its exposure to Blu was costing it about £20m a month and said its current Blu stake was in its books at about £46m.

BT looks set to be forced to buy an extra 9 per cent stake in Blu from Italian company Mediaset. BT admitted earlier this month it would have to spend a maximum of 106m euros buying the extra shares should Blu's others shareholders not want them.

The European regulator also recently ordered the Benetton family to sell its interest in Blu as a concession to allow its purchase of a controlling stake with Pirelli, in Olivetti, which controls Telecom Italia. The Benetton family holds 9 per cent of Blu through their Edizione Holding investment vehicle. Autostrade, which has a 32 per cent stake in Blu, is also controlled by Benetton.