Underlying Q1 profit falls 71 percent at BT

Though British Telecommunications PLC (BT) was able to make headway in paying down its massive debt, underlying pretax profit for the company fell 71 percent in the first quarter of fiscal 2001/2002, BT reported Thursday.

BT reported a pretax profit of 186 million pounds (US$263 million, as of June 30, the last day of the quarter being reported), compared to 637 million pounds for the same quarter last year, BT said in a statement.

BT's main focus has been to reduce its debt through restructuring and the sale of assets. During the quarter, debt fell by 10.4 billion pounds, bringing it down from 27.9 billion pounds at the end of March to 17.5 billion pounds, the company said.

Even so, the company paid interest on debts of 474 million pounds, compared to 239 million pounds during the same quarter last year.

In the first quarter, BT sold its online and print business directory operation Yell Ltd. for about 2 billion pounds, and made 4.8 billion pounds from the sale of BT assets in Spain and Japan to competitor Vodafone Group PLC.

The company reported net profit after tax of 4.36 billion pounds, significantly up on the year ago figure of 353 million pounds, largely as a result of the sale of these assets. BT said the sale of investments and businesses generated a 4.5 billion-pound profit for the quarter.

Revenue for the first quarter of 2001 came in at 5.45 billion pounds, an increase of 15 percent over the 4.73 billion pounds reported for the same period last year, BT said.

BT is also looking to cut around 6,000 job this year through "voluntary redundancies," a BT spokeswoman said.

"Last year we reduced the headcount by 5,800 through such voluntary redundancies and we expect the numbers to be about the same this year," the spokeswoman said. The company had previously though it would shed 5,000 jobs for the year, she said.

BT pointed to its wireless division as its most problematic area in the first quarter, with an operating loss of 95 million pounds, compared to an operating profit of 45 million pounds for the same quarter last year.

BT blamed the poor results on its new acquisitions, German mobile communications provider Viag Interkom AG and the Dutch wireless company, Telfort Holding NV. Together, Viag Interkom and Telfort posted an operating loss of 154 million pounds, BT said.

The debt incurred through the acquisition of licenses for 3G (third-generation) networks also continues to hamper the growth of BT Wireless, the spokeswoman said. BT has been looking to off-set the continuing costs of 3G by cooperating with other wireless companies, such as Deutsche Telekom AG (DT), on the rollout of their 3G mobile networks, she said. BT said it is still on track to sell BT Wireless and incurred costs of 14 million pounds in the quarter related to the sale.

Telecommunication carrier Concert Communications Co., BT's joint venture with AT&T Corp., also continued to perform poorly for BT. Concert lost 81 million pounds for the quarter, BT said. In particular, due to a weak wireless market and international competition, Concert had to reduce its pricing while its network capacity utilization remained low, BT said.

"We are still in discussions with AT&T on how to best improve Concert's performance," the BT spokeswoman said. When asked if BT is considering the sale or dissolution of Concert, the spokeswoman replied, "we are looking at every single possibility."

It was reported earlier this month that BT Chairman Sir Christopher Bland and AT&T Chairman and Chief Executive Officer (CEO) C. Michael Armstrong had held a face-to-face meeting to discuss ways in which Concert could be dissolved in a timely manner.

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