British Telecommunications, which owns Esat Digifone, has today announced a 70% fall in underlying first-quarter profits, hurt by interest on its much reduced debt pile and losses at the wireless division it plans to demerge this year.
The company also said its job cuts could total 6,000 this year rather than the 5,000 previously indicated, with 1,500 jobs likely to go at its Ignite corporate data business in Europe.
In its first report after its £5.9 billion rights issue, BT said profits before goodwill, exceptional items and taxation slumped to £186 million in the three months ended June 30, from £637 million a year earlier. Turnover rose to £5.45 billion from £4.73 billion.
The profits were in the middle of analysts' forecasts ranging between £70 million and £240 million, but BT shares slipped as much as 3% amid worries about the prospects for an independent BT Wireless. BT is now the UK sector's best performing stock. Though still down about 11% so far this year, it has also outperformed most of its big European rivals.
Wireless, Europe's fifth largest mobile company, booked an operating loss of £95 million on sales of £1.04 billion, with Viag Interkom in Germany losing £123 million.
BT Chief Executive Peter Bonfield said he expected to see 'meat on the bones' of plans to turn around Germany's fourth largest mobile operator by the end of the year.
Viag aims to improve per-user revenue by signing up more small-business users and higher-spending consumers, and boosting data services. Viag is one of BT's main outstanding problems after its success in slashing debt to £17.5 billion from £27.9 billion during the quarter.
Another problem is Concert, its unprofitable joint venture with AT&T Corp, which burdened BT with a loss of £81 million in the quarter. Bonfield said a resolution of Concert's future was still months away, and he refused to say whether BT favoured shutting it down or one partner taking control.
The imminent completion of the sale of BT's property portfolio and other disposals over the next six to nine months will reduce debt towards BT's target of £15 billion. BT's debt reduction will help profits by easing interest costs, which rose by £235 million to £474 million in the first quarter.
Pre-tax profits including the proceeds from the sales of its yellow pages business and investments in Spain and Japan jumped to £4.51 billion from £561 million.
Retail, its UK fixed-line business, lifted operating profits to £316 million from £225 million a year ago. Its new BT Together packages offering cheaper or unmetered calls cost it £90 million in the quarter, equivalent to a 6% cut in call prices.
Operating profits at BT Wholesale fell to £487 million from £595 million. Loss at Ignite narrowed to £78 million from £101 million. Openworld, BT's retail Internet division, cut its losses by £50 million from the fourth quarter to £41 million.
