British Telecom to cut 10,000 jobs
LONDON: Britain’s BT Group has beaten second-quarter earnings forecasts and announced 10,000 job cuts and a possible boost to its pension scheme,
sending its shares up over 12 per cent just days after a profit warning.
Shares in the former state telecom group crashed to historic lows less than two weeks ago after it warned about the profitability of its growth engine Global Services division.
Analysts at the time said BT was hitting a “perfect storm”, with concerns over its pension scheme, profitability, capital expenditure plans and dividend all coming at once.
However, they welcomed the results as finally bringing some good news to the company.
Its shares were up over 12 per cent at 126 pence at 0925 GMT.
BT said it had reviewed its pension scheme and proposed a range of changes such as raising the age of retirement and increasing employee contributions which could reduce the ongoing cost of the defined benefit pension scheme by around 100 million pounds per year.
It is consulting on the proposals and has won support from its main union.
“The shares will likely react positively today on the pension news alone,” Morgan Stanley analysts said in a note. “But longer term, risk-reward is now much more positively skewed.
“We believe that BT shares have been caught in a perfect storm over the last 12 months where all potential negatives (stock market impact on pensions, fibre investment/capex warning, Global Services profit warnings, mobile broadband) have already substantially materialised.”
Earnings blow
BT said last month it expected to report group revenue ahead of original forecasts but that earnings per share and earning
s before interest, tax, depreciation and amortisation (EBITDA) would be slightly below forecasts due to the poor performance of its Global Services unit.
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