BT profits continue fall

Stiff competition and the huge costs of securing next generation mobile phone licences have led to a 27% slump in British Telecom profits.

Pre-tax profits for the three months to 30 June fell to £561m, from £772m in the same period in 1999.

That works out at about £2.3m less profit per day than the previous year.

The decline in the amount of money being made by BT was despite a rise in turnover, to £6.8bn, from £5bn.

BT also blamed the cost of investing in the Japanese and Irish telecoms markets and the expense last year of taking complete control of BT Cellnet, buying a 40% stake off Securicor for the fall in earnings.

'Bargain' licences

Robert Brace, BT group finance director, described the £4bn cost of acquiring the UK third generation mobile phone licence as "not the best bargain of all time".

"The government has taxed the industry up front," he added.

Mr Brace predicted the tough UK market conditions would continue, with prices continuing their downwards trend.

He was bullish about BT's performance, despite the fall in pre-tax profits, arguing that when one-off costs such as the 3G auction were stripped out BT was growing faster than any other telecoms group in the world.

BT will have to overcome the declining profits from its fixed network in the UK, as competition from new entrants pushed down prices and people increasingly used mobile phones, said BT.

By contrast, turnover from BT's mobile businesses, particularly BT Cellnet and Esat Digifone increased by 22%, with the number of customers signing up to BT Cellnet increasing by 61% over 12 months to reach 8.1 million.

The number of business lines installed by BT grew by 5.7% to 8.6 million during the 12 months to 30 June, while the number of residential lines remained static at 20 million.

BT's management have been seeking to show investors that it is not being left behind in the fast growing telecoms market.

Share price fall

Its share price has fallen sharply in recent months, from more than 1500p to its Wednesday closing level below 900p.

A huge restructuring, including the spin-off of operations such as the internet based yellow pages service, Yell, was announced earlier this year but has so far failed to convince doubters.

Sir Iain Vallance, chairman of BT, pointed to the rise in turnover and to the recently announced restructuring as being causes for optimism.

"The restructuring of the group, announced in the quarter, aims to manage and develop these investments effectively and create value for shareholders."

The result was not as bad as had been feared by analysts, and BT shares rose 10p to 878p in early trading on Thursday.