Debt charges take toll on BT as Q1 profits fall 70%

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British Telecom said yesterday that first-quarter profits had fallen 70 per cent as interest charges on its huge debt burden bit and warned that the future of Concert, its loss-making joint venture with the US telecoms giant AT&T, was still up in the air.

Sir Peter Bonfield, the chief executive of BT, said he had a preferred outcome in mind for Concert but warned that it could take a few months to resolve. He added that the venture's cost base would be reduced further, which will mean job losses among Concert's 6,000-strong workforce. BT said its share of Concert's losses totalled £81m in the quarter.

BT's £474m interest charge on its debt held back profits in the three months to 30 June. Profits came in at £186m before goodwill amortisation, exceptionals and tax, down from the £637m reported in the same quarter last year. Sales rose 15 per cent to £5.45bn. BT confirmed plans to cut 6,000 jobs across the group this year.

Since the quarter end, BT's debt has been reduced to around £16.5bn. Philip Hampton, BT's finance director, said further assets would be sold in Hong Kong, New Zealand, Korea and India and hinted that BT would get out of its stake in the French telecoms firm Cegetel over the coming year.

Mike Williams, an analyst at Deutsche Bank, said: "In the context of the general market environment, just to be solid and in the range is a big relief." While Mr Williams said Concert remained "the single biggest issue" for BT to resolve, he was also disappointed with the sales performance of Cellnet, the communications giant's UK mobile phone operator.

BT Wireless, BT's mobile phone arm, recorded an underlying profit of £64m in the quarter, down from £116m. It was hit by losses at Viag, its German mobile business. Total sales rose to £1.04bn, up from £764m, but were just 1 per cent higher at Cellnet.

Orange, a rival mobile phone operator, yesterday reported first half sales of 7bn euros (£4.3bn) up 31 per cent on the same period last year, while UK sales came in at 2.57bn euros.

BT said it was "on schedule" with the demerger ofBT Wireless, which is expected to carry a BBB credit rating and to be spun off with up to £2bn of debt.