The group as a whole reported a third-quarter net profit up 69% at 354m pounds ($573.3m), up from 209m pounds ($338.4m) in the year-ago quarter, on revenue of 4.7bn pounds ($7.6bn), up 1% from 4.6bn pounds ($7.5bn). For the nine-month period to December 31, net profit rose 77% to 900m pounds ($1.4bn) from a net profit of 509m pounds ($824m), on revenue up 2% at 13.9bn pounds ($22.5bn), up from 13.7bn pounds ($22.2bn) in the same period last year.

BT’s CEO Ben Verwaayen said: These are excellent results. We are achieving our key goals of improving cash flow, earnings per share and customer satisfaction. These results demonstrate a substantial increase in profitability, with earnings per share growth of 71%.

As Europe’s first privatized carrier, BT has often led the continent both in its mistakes (an over-ambitious overseas expansion left it mired it debt) and its recovery program. Deutsche Telekom AG and France Telecom SA have followed its example in ousting the management responsible for their problems, but have yet to get to grips with their massive debts.

BT on the other hand has reduced its net debt by 195m pounds ($315.8m) to 12.9bn pounds ($20.9bn), a relatively small amount when compared with other European incumbents. This meant its net interest was down to 285m pounds ($462m) for the quarter, 33m pounds ($53.5m) lower than the same period last year.

BT’s net debt will be further reduced with the receipt last month of 2.6bn pounds ($4.2bn) from the sale of its 26% share in Cegetel SA, France’s number-two telephone company. BT has said that an exceptional profit of 1.4bn pounds ($2.2bn) will be booked in the fiscal fourth quarter from the sale.

However, despite the relatively health set of figures for the overall group, there was mixed results from BT’s divisions.

BT Retail, which provides traditional fixed-line phone services reported third-quarter operating profit up 31% at 379m pounds ($613.6m), on revenue that grew 2% to 3.3bn pounds ($5.3bn). This is despite the fact that overall revenue from voice services was 1% lower than the third quarter of 2001, partly as a result of lower revenue from fixed network calls reflecting a reduction in call volumes. This has been offset by higher analog line revenues and other services. BT continues to enjoy a 73% market share of the residential voice market, but its business voice market decreased slightly last quarter to 44%.

BT Wholesale manages the phone network, and for the third quarter reported operating profit down 11% at 526m pounds ($852m), on revenue that declined 2% to 2.8bn pounds ($4.5bn). Despite the fall, BT has seen a tremendous uptake of its broadband services.

Under the old management, BT believed there was little or no demand for broadband, but it is now generating its highest ever broadband sales, with in excess of 25,000 orders per week in January. Currently, BT says that orders for its no frills broadband service are now exceeding 7,500 a week. BT’s new management has placed broadband at the heart of its growth strategy, and with 650,000 connections so far, it is well on its way to a target of one million customers by the middle of this year.

BT Ignite, the loss-making data services division that provides data services business to major corporations, said it improved its performance slightly, despite the continuing difficult trading conditions in the corporate sector and reduced carrier revenues. The division reported an increased operating loss of 90m pounds ($145.7m) for the third quarter, up from an operating loss of 80m pounds ($129.5m). Revenues fell 1% to 1.2bn pounds ($2bn), from 1.1bn pounds ($1.8bn) in the same quarter last year. It experienced a 23% decline in carrier traffic following the decline in business with rivals AT&T and WorldCom.

The Internet Service Provider (ISP), BT Openworld, has made continued improvements in turnover, profitability and cash flow. It reported a reduced operating loss of 8m ($13m) pounds for the third quarter, down from an operating loss of 23m pounds ($37m). Revenue increased by 27% to 75m pounds ($121m) from 59m pounds ($95.5m). The improvement is mainly due to growth in new broadband products and continued revenue growth in the core narrowband product range. From January 1, BT Openworld comes under the management responsibility of BT Retail, and will report its results as part of BT Retail.

One question mark that remains over the UK-incumbent is the looming pension deficit for 2002. BT said its pension fund valuation for the end of 2002 would not be calculated until May, but the group’s actuary believed it could show a deficit of between 1bn ($1.6bn) and 1.5bn pounds ($2.4bn). BT blamed the shortfall on the plunging stock markets, which have eroded the value of pension investments.

Source: Computerwire