Vallance suffers 10% pay cut

Sir Iain Vallance, BT's chairman and chief executive, saw his total pay fall by almost 10 per cent to pounds 599,000 last year. The cut, which bucks the trend among heads of former nationalised utilities, was mainly due to a reduction in Sir Iain's bonus to pounds 115,000 from pounds 185,000 the previous year.

The change emerged as BT announced a 3.4 per cent drop in pre-tax profits to pounds 2.66bn after redundancy charges - equivalent to a profit per second of pounds 84. BT declined to say why the chairman's remuneration had suffered. Sir Iain, whose basic salary is to increase by 3.2 per cent to pounds 480,000 from 1 July, said: "Bonuses go up and down. I am used to that. The full works will come out in the annual report."

BT cut 18,500 jobs during the year - well ahead of expectations - and will reduce the workforce by another 10,000 by March 1996. The company said the numbers would "continue to drift down" after that but at a lower rate than recently.

The cost of redundancies during the year was pounds 820m, with the average payout about pounds 50,000 per employee. Expecting to spend between pounds 400m and pounds 500m on job losses his year, BT said the payback for the cuts comes in two years or less.

Turnover in the 12 months to 31 March rose by 1.6 per cent to pounds 13.89bn and earnings per share fell by 2.4 per cent to 27.8p. The dividend increased by 6 per cent to 17.7 per cent, reflecting the "good underlying performance".

Sir Iain said: "Future dividends will continue to be influenced by the effects of competition and regulation in the UK together with investment needs and opportunities in the UK and overseas."

He added: "BT's trading prospects are sound but susceptible to a hostile and unpredictable regulatory environment at home and the uncertain shape of regulation abroad." He said BT expected "no sudden discontinuity" in dividend policy.

Strong improvements in Cellnet, BT's mobile subsidiary, helped increase the overall use of BT's services by 8 per cent. The improvement offset price reductions of 6 per cent across the group, largely imposed by Oftel, the regulator.

The number of business lines installed grew by 5.4 per cent in the year, but residential lines grew by less than 1 per cent in the face of increased competition from cable companies.

Michael Hepher, groups managing director, promised to step up the fight against cable firms, which are taking 50,000 BT customers a month in local telephony. He said "armies of BT people" would convince people of the desirability of staying with or coming back to BT.

Mr Hepher said BT had won back custom from 8,000 business sites. In the residential market, he said the "It's good to talk" advertising campaign had changed attitudes and increased people's inclination to pick up the telephone. "Personal callers made 1 billion more calls last year - an extra call each week per household," he said.

BT is expanding internationally through Concert, its joint venture in global business communications with MCI of the US. It has also forged alliances in Europe, notably a link with Viag of Germany to compete with Deutsche Telekom. BT is expected to make a move in France soon.