Colt cuts 800 jobs and slices £550m off value of network

Colt Telecom, the business telecoms operator, yesterday axed 800 jobs and announced a £550m write-down in the value of its pan-European network.

The cuts come on top of 500 job losses announced in February and will reduce the company's workforce to 4,300. About a fifth of the job losses will be in the UK, where Colt employs 1,000 people.

A spokesman said the latest redundancies, which will be compulsory, would lead to a £25m charge in Colt's third–quarter figures but would produce savings of £40m a year from 2004 onwards.

Colt's network spans 32 cities in 13 European counties, linked by 15,000 kilometres of fibre-optic cable. The asset write-down will reduce the book value of the network to £2bn. Colt took a smaller £170m write-down last year following the closure of its internet hosting centres.

Steve Akin, Colt's chief executive, said that now it had completed the building of the network, it needed to manage the business differently by operating as a single pan-European company. The bulk of the job losses will be in marketing, human resources, finance and IT as Colt cuts out duplication of roles across the network. But there will also be reductions in front-line operational staff.

"While trading performance is encouraging, in today's business environment it is important that we continue to achieve improvements in revenue mix, employee expenses and other expenses," Mr Akin added.

Colt's future was secured last December after its founding shareholder, the US investment group Fidelity, agreed to back a £497m fund raising. The fund raising, which is designed to give the group enough cash to see it through to break even in three years, increased Fidelity's shareholding to 55 per cent.

The group's cash and liquid resources currently total about £1bn. Colt has set itself a target of generating a positive free cash flow during 2005.

Colt said it expected earnings before interest, tax, depreciation and amortisation to increase to £17m in the current quarter ending 30 September compared with £14.7m in the previous three months.

Turnover is expected to be similar to the £258m achieved between April and June because of the slowdown in sales caused by customers being on holiday. Capital expenditure will be less than the £111m spent in the previous quarter.

Last year it made a profit before interest, tax, depreciation and amortisation of £25m. Revenues were £905m compared with costs of £880m.