BT, the UK's leading telecoms group, posted a 32% increase in fourth quarter profits after cutting costs over the past year.
BT reported pre-tax profit before exceptional items of £490m sterling for the three months to March, as turnover rose by 1% to £4.78 billion. The firm also reported a better than expected dividend.
The company cut its net debt by £3.3 billion to £9.6 billion, a third of the £28 billion debt it had built up before it sold mobile unit mmO2.
BT also calmed fears about its pension fund deficit which has seen the telecom's share price suffer a sell-off recently over fears about its pension funding.
BT had a £2.1 billion deficit in its pension fund at December 2002, double the deficit at the end of 1999. The company said it will increase its annual payments into the fund by 16% to £232m from next year to plug the gap.
Under the new FRS17 accounting standards, BT reported a £6.3 billion gap in its pension fund, one of the largest Britain has seen because of three years of declining equity markets.
