BT will lay off around 3,000 managers over the next nine months as it toughens up to tackle increasing competition in the UK which is damaging its profit.
The telco blamed falling margins on its UK fixed line calls, the increased use of the Internet and the cost of connecting fixed to mobile calls for the 16 per cent slump in profit during its third quarter, reported today.
BT's total turnover for the third quarter, ended 31 December 1999, was £5.58 billion, compared with £4.68 billion in Q3 1998. However, the pretax profit excluding one time charges was down from £872 million in Q3 1998, to £722 million in Q3 1999.
Around 10 per cent of BT's management staff will be made redundant. Administration and support departments will be the primary target, with front line sales and engineering staff to be left largely untouched.
In addition, BT plans to defend its dwindling market share by doubling its TV advertising spend in the next quarter. But Sir Peter Bonfield told reporters in London today: "This is not something we can market ourselves out of."
Robert Brace, BT's finance director said the next quarter would show similar profit - around £817 million - slightly higher than Q4 1998. Redundancy expenses won't hit for six to nine months. In London, BT's share price fell 18 per cent during the day, closing at 976.0 pence.
Bonfield in part blamed government regulator Oftel for strangling its margins. Oftel last year forced BT to cut the price of calling fixed to mobile by 25 per cent. It has also made BT offer wholesale call time to competitors.
Moreover, the Number Translation Service, where ISPs using the 0845 dial up number get a majority chunk of the call time, has hit BT, Bonfield said.
"We're saying to Oftel we've got nothing against having a competitive marketplace, but make sure you don't get it too far out," said Bonfield.
As well as opposing the NTS scheme, BT objects to Oftel's decision to allow new operators to install and maintain their own broadband asymmetric digital subscriber line (ADSL) equipment. BT wanted to manage the equipment itself and sell it wholesale. Bonfield said new entrants will now 'cherry pick' the most affluent areas for launching broadband.
Bonfield effectively ruled out the prospect of offering free local calls, to boost its customers, copying the US model. "It's unlikely that we'll ever drop local call charges," he said.
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