BT slumps to its first-ever loss and slashes jobs

Problems at BT's Global Services Division, which deals with corporate computer networking, have led to it writing down £1.3bn in the fourth quarter. The huge reduction stems from its over-estimation of the profitablity of many of its contracts and helped it to an overall loss.

BT chief Ian Livingston told investors on Thursday morning that the performance of the division was "unacceptable" as it dragged the company to a £1.28bn pretax loss. The company had warned the market twice before over the division’s profits but the scale of the latest figures still shocked analysts.

As a result of BT's problems it slashed its dividend to 1.1p, giving a full year pay-out of 6.5p, a 59 per cent decline on last year. As well as the problems in its Global Services unit the company is struggling to fund its pension scheme and it announced it would be doubling its contributions to £525m a year, until 2012.

Some experts estimate the size of the pensions hole at around £11bn, more than the size of the company itself. BT is currently conducting a three-year review of its pension scheme but has yet to announce its findings.

BT had already announced cuts in employees and contractors of 15,000, but with current problems impacting the bottom line it has been forced to double those job losses to 30,000.

The cuts add to the UK's gloomy employment outlook, after figures earlier this week showed 250,000 jobs were lost in the first quarter and suggested the situation is unlikely to improve any time soon.

WHAT THEY ARE SAYING
Simon Duke, Daily Mail: "BT has 1.4m small shareholders, many of whom bought stock when the state-owned monopoly was privatised by Margaret Thatcher in 1984. Since then its share price has fallen from 125p to less than 95p. These investors can expect little in dividends, as BT is predicted to pour more than £500m a year into its pension fund for years to come."

David Prosser, Independent: "It's less than a year since Mr Livingstone stepped up to the top job, having previously been a widely acclaimed leader of BT's retail division, and the problems he now surveys from this lofty perch – a pensions black hole and an underperforming Global Services unit - are very definitely not of his making. Of the two issues, BT's pension problem is the most serious. How the new chief executive responds to that challenge will set the tone at BT for several years to come." ·