BT battles on despite £450 million bill shocker

12 November 2007
BT’s ambitious restructuring plan along with campaigns to boost its public profile and attract new broadband customers has cost the firm a phenomenal £450 million and caused a 17% drop in pre-tax profits to £1.04 billion.

Following the company’s second quarter and half year results published last Thursday, shares in the telecom giant also slipped by 4.2% closing at £3.02.

BT has spent £167 million in restructuring, including a redundancy programme affecting 4,000 management staff, with the aim of remodelling itself as a forerunner in the IT and communications sector. However, it is thought it will take a total of three years to recoup the losses and the next six months will be crucial in getting the firm is back on its feet.

Despite the hefty makeover costs, BT is still winning the broadband war. Currently it has more than four million broadband customers and an estimated one in three of all new broadband customers in the UK signed up to BT in the past three months alone.

Chief Executive of BT, Ben Verwaayen, comments: "We are achieving a significant transformation of our business which will deliver further efficiencies alongside faster, better, smarter services for our customers."

A ubiquitous TV ad campaign featuring actor Kris Marshall of ‘My Family’ fame has also helped secure a further 100,000 customers for the BT Vision broadband TV service meaning the company has been able to increase the amount it made per customer by £5 to £271 a year.

BT Retail has been one of the star performers over the past year which is in part due to a successful advertising campaign featuring celebrity chef Gordon Ramsay which has boosted the public profile of BT as a provider of IT services for businesses.

The fly in the ointment, however, has been the reduced revenues from the lucrative competition calls which saw viewers deceived in the premium rate telephone scandal, causing BT to lose out on an estimated £20 million.

However, Verwaayen remains confident that BT will continue its growth: “Our confidence in the future performance of our business is reflected in the interim dividend of 5.4 pence per share, which is 6 per cent higher than last year. This shows our ongoing commitment to improving shareholder returns”.

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