BT staff cuts trim profits back to pounds 698m: Lower charges lead to higher volume

REDUNDANCY costs cut BT's pre-tax profits to pounds 698m in the third quarter from pounds 705m a year earlier, in spite of increased use of the telephone.

The company has shed 7,000 jobs since the beginning of the financial year and expects about 6,000 more to go, putting the price tag for the year at pounds 500m.

BT said redundancy charges in the third quarter were pounds 142m compared with pounds 17m in the same period last year.

Pre-tax profits in the first nine months jumped 27 per cent to almost pounds 2.2bn, about pounds 93 a second.

The company said the results were distorted by non-recurring factors and that underlying growth was 4.4 per cent.

Demand for services has grown for the third successive quarter, reflecting an improvement in the economy and lower call charges. Inland call volume was up 4 per cent in the three months to 31 December and 2.3 per cent in the year.

BT said that the growth in calls substantially offset discounts for volume customers introduced over the past year. It also said that it expects to benefit further from lower weekend call charges, which were introduced in December, and from the abolition of peak rate calls from 9 March.

Robert Brace, group finance director, said that the price cuts - forced on the company by Oftel, the watchdog - are worth about pounds 500m for the full year. It was too early to say how much this amount would be offset by extra use of the network.

'The opportunity to use the network more is immense. We have to persuade people that it is good for them and enhances their lives.'

Mr Brace added that growth in future would result from improvements in existing services and the introduction of new ones, including delivering videos and information services over the telephone wires.

BT will also continue its drive to expand overseas but says that it remains restricted by the regulatory regime in other markets.

International call volumes grew 8.3 per cent in the nine months to 31 December, but the corresponding increase in turnover was offset by lower call charges.

Cellnet, BT's mobile telephone joint venture with Securicor, has also grown strongly during the year but profits were held back by marketing costs and investment in the network to cope with the greater demand.

BT attacked as 'disappointing' the recent changes made by Oftel in the amount the company can charge rival Mercury Communications to use its network. The company said that it has refunded pounds 73m to Mercury as a result of Oftel's decision, including back payments in respect of calls made since June 1992.

Sir Iain Vallance, BT's chairman, said: 'It is encouraging that we continue to achieve steady volume growth despite growing competitive pressures.'

Downward pressure on prices meant that the company must continue to increase efficiency and cut costs, he added.