Management cull fires BT profit slump

BT's ongoing round of sackings has caused a slump in profits as it counts the cost of offloading middle managers, the national telco said today.

It's the second consecutive quarter in which a group-wide bid to slim down and refocus on broadband and services has hit finances. Profit before tax, including the exceptional restructuring costs, was £447m, 30 per cent down on the same quarter a year earlier. Excluding the £76m cull they were seven per cent down to £601m.

The BT Wholesale division performed worst, with revenue sliding 11 per cent to £1.2bn in the three months to December 31. The drop reflected an increase in defections to local loop unbundled broadband and a cut in the charges it makes for broadband resellers. Last year's TV quiz fraud scandals cost BT's premium rate revenues £68m too. Wholesale operating profit before redundancy costs was down 20 per cent.

Retail revenues inched up two per cent to £2.14bn. the division bagged 177,000 new broadband customers by the end of 2007; 35 per cent of connections in the three month period. It takes BT Retail's total to 4.25 million subscribers. BT Vision now has about 150,000 subscribers, leaving it less than a month to hit the "hundreds of thousands" BT targeted by the end of this financial year.

BT Global Services, its high margin IT services unit, provided the bright spot with six per cent to £1.97bn year-on-year.

At the end of 2007 BT Openreach reported it now services 3.7 million external lines, with 500,000 customers having taken the LLU plunge in the quarter. That growth was counterbalanced by a fall in the business Openreach received from other BT divisions. It meant Openreach revenues were flat at £1.3bn.

Overall group revenues were up one per cent to £5.2bn, slightly short of City analysts' expectations. BT chief exec Ben Verwaayen called the performance "solid", but at time of writing traders had sent shares plummeting almost 8.5 per cent.

The full financials are here. ®