Prospects for British Telecommunications Plc are still uncertain with yet another significant drop in profits. At the pre-tax level, profits fell 27.8% to UKP596m, while turnover declined 2.1% at UKP3,273m. The situation is said to be the result of continued pressures exerted by the economy, regulation and competition. Heavy redundancy costs of UKP67m, with UKP56m charged against profits, also contributed to whittling away margins. In the initial phase of massive job reductions within the company, a cool 9,900 people left in the first quarter alone, 5,200 of them due to the disposal of non-core businesses. This cut in manpower is said virtually to off-set the effect of pay increases to remaining staff. This financial year, another 29,000 are expected to go under the voluntary release scheme. Restructuring of management cost a further UKP11m, but this was set against the provision taken in 1990. Operating costs, excluding redundancies, remained static at UKP2,418m. A marked fall in volume in the first quarter saw inland call revenues off 3.7% to UKP1,269m. This was down to competition as well as the continuing recession. The 12-month moving average of inland call volumes also saw a slight fall of 1%. Although international call volume grew 5% on a 12-month moving average, the September 1991 cut of 9.6% on outgoing calls and continuing price cuts on some major incoming call routes cut revenue 8.4% to UKP435m.
Recession and competition
Transit traffic remained buoyant and accounted for most of volume growth. Price rises in September 1991 on telephone exchange line rental brought increased revenues of 8.3% at UKP551m. In addition, the number of business and residential exchange line connections each grew by 1.1%. However as a result of the recession, competition, lower connection revenue and price control on hard-wired telephones implemented from April 1992, income generated from the supply of customer premises equipment fell 5% to UKP249m. Other sales and services revenue increased by 2.5% to UKP739m. This figure included a significantly improved interconnect income from Mercury Communications Plc, a higher level of private circuit revenues and strong growth in turnover from mobile communications due to Cellnet’s good performance in the quarter. A reduced level of capital expenditure was down to completion of connection of all London customers to modern telephone exchanges as well as reduction in the rate of expansion of the network during the recession. Capital expenditure fell 16.3% to UKP492m. Net debt was cut to UKP1,790m due to the traditionally strong cash flow during the first quarter, combined with UKP22m new equity capital raised from employee share schemes. Gearing was also reduced to 15% from 27% last year. So yet again, it seems that BT is proving how recession-proof it is not.
