BT sharpens the cost cutting axe

BT chief executive Ben Verwaayen is expected to reveal a new round of cost cuts on Monday.

In a strategy presentation, Verwaayen is likely to say that new cost reduction targets for BT Group's loss making European operations are needed to reassure investors and free cash flow.

Verwaayen aims to make BT Ignite break even in Europe by March next year.

In the past 12 months BT has focused on cutting its massive corporate debt, raising funds through a new rights issue, selling off assets abroad, breaking up its loss making Concert venture with AT&T and demerging its mobile arm into mm02.

It has also axed thousands of jobs and even sold off the family silver, or at least parts of its property portfolio, to cut costs and move back into the black.

Verwaayen has already said that the company is planning to focus on large corporate clients instead of small to medium sized enterprises.

But it now seems that he has plans for a much bigger restructuring, with more jobs to go in its loss making activities in Europe.

In part the move is being made to appease analysts who believe BT has overestimated demand for data in Europe and want the telco to pull out altogether to cut losses of hundreds of millions of pounds a year.

BT Ignite's European operations in Germany, The Netherlands, Spain and Italy cost the company more than £94m in lost revenue last year.

It has also invested in a 35,000-mile network linking 290 cities across Europe in the incorrect belief that data and internet traffic would swell this year. But BT is unlikely to pull out of Europe altogether.

Verwaayen may also confirm a rumoured deal with BSkyB to provide content over its network, and discuss how BT Retail will be allowed to promote broadband services, such as those sold by BTopenworld.

Current regulatory rules prevent divisions of BT promoting each other's products.