20,000 face axe as BT profits top £660m

BT will cut more than 20,000 jobs over the next couple of years on top of the 100,000 axed since 1990 at a cost of £2.4bn.

Robert Brace, BT's finance director, said that staff numbers fell by 11,200 in the first nine months of the year to 144,800 compared with 240,000 five years ago.

"We cannot keep reducing at 15,000 a year. I hope that the `Release 95' scheme starting in April will be the last group-wide, high-level redundancy scheme," he said.

Mr Brace was speaking as BT announced pre-tax profits for the third quarter of £660m after £217m in redundancy charges, compared with pre-tax profits of £698m in the same period last year. He said that after next year's round of job losses, there would still be voluntary redundancies but that they would be more focused and local.

The results were boosted by a 7 per cent increase in inland call volumes on a 12-month rolling basis. The rise, more marked in residential than business calls, is due to improvements in the economy and aggressive marketing.

Mr Brace said: "There is a growing perception that telephone calls represent good value for money."

Earnings per share in the third quarter were 7.1p compared with 7.3p in the same period of 1994. Without redundancy costs, the underlying increase was 3.1 per cent.

The company said that the results were "creditable" in a period where customers had seen large price reductions and that the company remained well-positioned to meet competition at home and abroad.

However, it warned of increasing uncertainty from changes in the regulatory system now being considered by the regulator, Oftel.

Pre-tax profits in the first nine months fell to £2.153bn from £2.198bn a year earlier. Turnover increased to £10.317bn from £10,19bn, helped by record growth at Cellnet, the cellular telephone company owned by BT and Securicor.

Mobile communications turnover grew 43 per cent in the nine months with Cellnet adding 543,000 users. However, the fierce competition for customers and subsidies paid by mobile operators to dealers resulted in heavy up-front costs.

BT said: "The rapid expansion of Cellnet's cellular services has resulted in additonal costs being incurred in winning new business and supporting additional customers. Higher expenditure on these and other marketing activities were the main factors behind a £255m increase in operating costs."

In spite of increased competition from cable and other companies, business exchange line connections grew by 5.6 per cent, and residential connnections in the 12 months to December. This brings the total size of the network to 27 million connections. BT has been fighting hard to fend off the onslaught of the cable industry, which is adding many thousands of telephone lines each month.

BT said that the results for the latest quarter included a first-time contribution of £29m from MCI, the US telecommunications in which BT has a 20 per cent stake. The results also include a £33m profit from disposals including the sale of BT Marine to Cable & Wireless.

BT confirmed it would make a profit of £200m from the sale of shares in AT&T, the largest telecommunications company in the world. BT acquired a small stake in return for its 17 per cent holding in McCaw Cellular Communications.