British Telecommunications PLC (BT) on Thursday reported heavy losses for its second quarter, due in large part to the exceptional items incurred by disbanding Concert Communications Co., its joint venture telecommunication carrier with AT&T Corp.
BT reported an after-tax loss of 1.48 billion pounds (US$2.18 billion, as of Sept. 30, the last day of the quarter being reported), a stark contrast to its profit of 280 million pounds in the same quarter last year, BT said in a statement.
The massive losses include BT's write down of 1.2 billion pounds of investment in Concert and AT&T Canada, BT said. BT and AT&T announced on Oct. 16 that due to continued losses from over capacity and a sharp drop in telecommunication prices, the multinational company would be shut down and its assets returned to the parent companies. BT's share of Concert's loss in the second quarter was 40 million pounds, compared to a profit of 46 million pounds in the same quarter last year, BT said. The company also laid blame on weak sales by its global distributors and its wholesale operations.
Earnings for BT, stripping out exceptionals, interest, tax, depreciation and amortization, were 1.46 billion pounds in the second quarter, down 7 percent from 1.57 billion pounds in the second quarter of last year, the company said.
The company's debt, which at one point earlier this year reached nearly 30 billion pounds, stood at 16.5 billion pounds by the end of the second quarter, BT said. The reduction in debt was due to its rights issue, which closed in June and raised 5.9 billion pounds, as well as the sale of assets. BT's Japanese assets sold for 3.7 billion pounds and 2 billion pounds were raised from the sale of its former Yell directories business, BT said.
BT forecasted a debt of between 15 billion and 17 billion pounds by March 31, 2002.
BT also announced that its finance director, Philip Hampton, will leave the company next year. Hampton's contract had been until November 2002 and an announcement about his departure had not been expected.
Hampton's announcement comes just over a week after BT confirmed that its Chief Executive Officer (CEO) Sir Peter Bonfield will step down in January 2002, a year ahead of schedule. Hampton had been considered one of the candidates for BT's top job, but instead has decided to depart BT after it completes the spin off of its wireless division MMO2 PLC as a separate, publicly traded company on Nov. 19, BT said.
In the second quarter, MMO2 lost 94 million pounds on an operating basis, compared with a loss of 127 million pounds by the wireless division in the same quarter of last year, BT said. About 11 percent of the wireless division's income is derived from data traffic, BT said.
The company added that due to its preparations for the floatation of MMO2, BT was taking a charge of 74 million pounds in the quarter. MMO2 will enter the market with about 500 million pounds of debt, BT said.
As part of cost-cutting efforts in its international operations, MMO2 has agreed to cooperate with Dutch cellular carrier KPN Mobile NV in building 3G (third-generation) mobile networks in the Netherlands, BT and KPN announced in a separate statement. The companies expect to begin offering services over their 3G networks beginning in 2003, BT and KPN said.
As for the rest of BT Group, including BT Retail, BT Wholesale, BT Ignite and BTopenworld, the company reported a 0.173 pound loss per share for the second quarter. The group's underlying operating profit was 1.39 billion pounds, if exceptional items such as the Concert losses were stripped out, BT said.
BT reported group turnover for BT Ignite of 1.131 billion for the second quarter, up 38 percent year on year. The growth in the division was driven by an increase in U.K. IP (Internet Protocol) revenue as well as growth in European connectivity revenue, BT said.
BTopenworld reported an operating loss of 36 million pounds on revenue of 57 million pounds in the second quarter. Most of the revenue in the division came from the sale of narrowband Internet access services and to a growing extent, its new broadband Internet access services, BT said. Broadband revenue were 9 million pounds in the quarter, a 49 percent increase from the June 2001 quarter, BT said.
In late afternoon trading, BT shares (BT.LON) on the London Stock Exchange were down 0.1025 pounds to trade at 3.2775 pounds per share, a 3.03 percent decrease.