BT shares fall on write-down fears

By THIS IS MONEY
Updated:

 

BT shares were back near record lows today amid fears the firm is poised to announce a £1.5bn hit at its troubled global services division.

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Fears: BT is said to be preparing the mammoth write-down.

The stock was the FTSE 100 Index's leading faller - down 4% - after the weekend reports, which also included a potential further 10,000 job cuts.

BT is said to be preparing the mammoth write-down on the value of contracts at its global services arm, which provides IT networks to multinational businesses.

There is also speculation that the firm - labouring under a huge pension fund deficit - will cut dividend payouts to shareholders at annual results on May 14.

The latest blow to the share price will hit thousands of smaller investors. Around 38% of BT's shareholders - more than 400,000 people - hold less than 400 shares in the firm, which listed on the stock market in November 1984.

BT has already announced £340m of provisions in February's third-quarter results after taking a more cautious view of progress on cost savings and the performance of the division's contracts.

This write-down is thought to relate to 15 of its 17 biggest contracts, although the biggest headache yet to come for BT is said to be its work on the £12.7bn overhaul of the NHS's computer system.

Other contractors on the project have quit, writing off hundreds of millions of pounds in the process, according to reports.

Meanwhile the group, which has already made 6,000 contractors redundant during the past few months, has introduced harsh new terms for workers in global services - including pay cuts of between 10% and 30% - to cut costs.

Although its other businesses are performing well, BT first signalled the problems at the global services division last October, sending its shares into a tailspin.

The firm has also launched an overhaul of its 69,000-strong pension scheme, which had a deficit of £1.7bn as of February.

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