BT profits from asset sale

July 26, 2001 Posted: 0711 GMT

LONDON (CNN) -- British Telecom, the UK's second-largest phone company, said on Thursday first-quarter profit rose after it sold assets to pay off debts.

Net income rose to £4.35 million ($6.2 million), or 57.4 pence a share, in the three months to June 30. That compares with a profit of £306 million, or 4.1 pence a share, in the year earlier period. Sales rose 15 percent to £5.45 billion.

But without the sales of assets, such as telephone directory Yell, stakes in mobile phone companies in Spain and Japan, the company posted a loss of £35 million.

BT under the new chairmanship of Christopher Bland has sold various assets, raised £5.9 billion through the sale of shares, and plans to spin off its mobile phone business, BT Wireless, as it cuts a debt mountain that has crippled its standing among investors and battered its stock.

"The first quarter has been one of considerable progress in lowering group debt," Bland said. "Disposals and the rights issue combined to reduce net debt to £17.5 billion, compared with £27.9 billion pounds at the end of March."

The company said underlying profits fell to £186 million in the first three months of its year, compared to £637 million in the first quarter of last year. Analysts were predicting an underlying profit of £70-£240 million, according to a Reuters poll.

Bland said improvements at its Retail and Ignite divisions offset losses at its German and Dutch mobile operators to leave earnings before interest, tax,

depreciation and amortisation (EBITDA – a measure of profitability of companies with huge debts) unchanged at £1.52 billion.

BT Wireless, which includes Viag Interkom in Germany and Telfort in the Netherlands for the first time, posted an operating loss of £95 million compared to an operating profit of 45 million in the year earlier period.

"The principle reason for the change is the incorporation of operating losses from Viag Interkom and Telfort amounting to £154 million," the company said.

BT's share of losses from Concert, its joint venture with AT&T Corp (T: Research, Estimates), was £81 million. The company is under pressure to break up the business that sells services to international corporate customers.

BT and AT&T are in talks to improve the performance of the business, the company said.

Shares in BT (BT-A) rose almost 1 percent to 455.2 pence in early London trade.

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