British Telecommunications Plc looked to have produced healthy third quarter figures with net income up 20.2% at 720m pounds ($1.18b) on revenues up 4.7% at 3.9bn pounds ($6.5bn), but the income was inflated due to a one off gain of 238m pounds ($390m ) attributable to the merger break up fee paid by WorldCom Inc, without which revenue would have been flat. Conversely, the third quarter results have been hammered by a 510m pounds ($836m) charge for windfall tax payment made in the second quarter, and nine-month net fell 20.1% to 1.3bn pounds ($2.1bn) on revenues up 5.0% at 11.7bn pounds ($19.2bn). But there are already signs of BT’s potential future earnings stagnation. The company reported a huge drop in its international revenues – down 15% in the quarter to 383m pounds ($628m) and 1.2bn pounds ($1.9bn) in the nine months – partly due to cost cutting but also because of changes in international call cost structure due to the collapse of the international telecoms accounting rate. British Telecom refused to discuss how it is going to address this problem. Other areas of weakness are in the national call market where revenues have remained flat. The strongest growth came in the BT’s mobile phone joint venture Vodafone Plc with revenues up 16% in the quarter and 14.5% in the nine months. Regarding the company’s 20% stake in MCI Communications Corp, BT says it return to shareholders some of the $7bn in cash it expects to get when WorldCom Inc acquires the company. BT did not say how or when any of the $7bn will be returned as it will depend upon the competition of the MCI/WorldCom deal. At that time BT also says it will acquire MCI’s 25% stake in Concert, the international telecoms alliance built up by BT and MCI but also including Telefonica de Espana and Portugal Telecom. BT continues pitch the suitability of Concert as an international venture saying it hopes Concert’s revenue growth will continue around the 60% mark, and claims it will finally break even this year.
BT closed up 0.7% at 5.74 pounds ($9.40). British Telecom also confirmed that chairman Sir Iain Vallance will become part-time chairman, having been elbowed to second slot by the appointment of chief executive Sir Peter Bonfield in November 1995.
