At the nine month stage of its fiscal year, British Telecommunications Plc continues to blame recession, competition and regulation for a flat set of results that didn’t match analysts’ expectations. Although BT’s Michael Heffer said that the figures were in line with internal forecasts, he warned against complacency because ‘adverse market forces will continue to affect performance’. Chairman Iain Vallance was somewhat more optimistic, saying the first slight signs of volume growth seen in the second quarter have carried on to the third. This means, he said, that underlying earnings for the quarter have been held at around the previous year’s level – earnings per share, excluding redundancy charges, fell 0.3%, but dropped 12.2% if such charges are included. While people may well be making more calls because Oftel has demanded that BT cut its prices, benefits have not translated into revenues. Pre-tax profits fell 26.9% to UKP1,732m, against expectations of between UKP1,756m and UKP1,788m. While analysts forecast profits of between UKP720m and UKP750m in the third quarter, again BT only managed UKP705m. Turnover also fell 1.1% to UKP9,812m. Vallance attributed this to the sale of the group’s interests in Mitel Corp, International Aeradio Ltd, and Sharelink Ltd in its first quarter. Revenues from continuing businesses increased 0.4% in the nine months, but rose 1.6% in the third quarter. Net profits, were hit by UKP191m charges, falling 32.2% to UKP1,070m. This included UKP56m charges for the premium repaid on the repurchase of Government-held bonds in December 1992; UKP135m losses on disposal of businesses, which resulted in 5,200 redundancies, and UKP459m redundancy charges. Since March 1992, BT has got rid of 38,300 staff, and on December 31 total headcount was 172,200. For the nine months, redundancy costs totalled UKP592m, but UKP133m of this was covered by the restructuring provision set up in 1990. The figures include about UKP530m relating to pension benefits from staff taking early retirement. Although redundancies cost the group another UKP17m in the third quarter, Vallance reiterated his pledge to shed 15,000 people over the next two financial years; he claims to have reaped the benefits of reduced expenditure on staff because operating costs, before redundancy payments, have fallen 0.8% in the nine months. If such costs are included, operating profit actually fell 18.8% to UKP2,120m. Also, while BT cut net debt from UKP2,246m to UKP1,631m at December 31, it will have to dip into reserves during its fourth quarter to pay corporation tax, interim dividend and repay loans, together totalling UKP1,700m. Individual areas of business again experienced mixed fortunes.

Sunday Special

In the nine months, turnover generated from inland calls was flat because volume of calls on a 12 month moving average remained static. But, revenues grew 1.2% in the quarter due to the ‘Sunday Special’ deal whereby national calls after 3pm on Sundays were charged at local rates. Turnover from international calls rose 4.8% in the third quarter, reducing the total fall in revenues for the nine months to 1.9%. On a 12-month moving average, international volume continued to grow by 5%, and price cuts were offset by more people making more calls during the nine months. Exchange line rental income was up 5.9% to UKP1,657m ‘mainly due to the rebalancing price increases in September 1991’. In the 12 months to December, it connected 1.6% more residential and business exchange lines. And increased revenues from private circuits and mobile communications, including the Cellnet business with its ‘Lifetime’ service for low-usage customers, meant turnover from other sales and services increased 1.8% to UKP2,226m. Revenues from customer premises equipment fell 6.7% because the market continued ‘depressed and highly competitive’. As for the group’s provisional agreement to sell its 20% stake in McCaw Cellular Communications Inc to AT&T Co, Vallance said he expects to make about $1,800m, or upwards of UKP250m profits before tax. The price will increas

e at 4.5% a year from December 31 till either dealing is closed or September 30 1993, whichever comes first.