Leaner BT makes fitter profits

By Alun Williams

Posted on 25 Jul 2002 at 13:15

BT's profits jump 61 per cent while it chips away at its mountain of debt.

Attributing its success to improved efficiency and cost controls, the telecom giant has reported a quarterly profit of £322m, which is an increase of 61 per cent on the same period a year ago.

In the financial quarter - covering May to June - the debt of the telecom giant was also cut by £300m. More than £13bn still remains outstanding, largely as a result of investments in 3G technologies and licences, but the company was faced with a debt mountain of £30bn as recently as March 2000.

While acknowledging 'adverse market conditions' for telecommunication companies, BT highlighted a growth in the installation of ADSL - BT Wholesale was responsible for installed ADSL lines exceeding 300,000. The company also cited regulatory Network Charge Control pricing formulae and Oftel controls as a cause for slower growth in 'more traditional' telecom areas.

Oftel, of course, has put BT under pressure on various pricing issues, such as the cost of ADSL and leased lines. The regulator very recently ordered BT to cut to cut the cost of its wholesale unmetered Internet access for third-party operators by eight and a half per cent.

'Until now, Oftel has had to use estimates to assess BT's charges, but new information on BT's Internet traffic volumes is now available, enabling Oftel to reassess these charges,' said David Edmonds, Oftel's Director General of Telecommunications at the time. 'This reduction means that operators can now buy capacity from BT cheaper than before. Operators have the opportunity to pass these savings on to ISPs and through them to consumers.' However, in the financial quarter under consideration, BT has been enjoying this eight and half per cent cost benefit.

Expressing confidence for the future, Ben Verwaayen - BT Group's CEO - hailed the company's achievement in improving shareholder value, cash flow and also customer satisfaction. 'Overall turnover growth of two per cent was slower than expected with no growth in sales to other telecoms operators,' said Verwaayen. 'However the improved efficiency in our businesses delivered strong profit growth.'