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Debt hammers BT profits
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February 8, 2001: 7:15 a.m. ET
U.K. telecom firm's earnings slump as its interest bill triples
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LONDON (CNN) - Asset sales will cut British Telecom's debts by £10 billion ($14 billion), the company said on Thursday, even as quarterly profits halved.
The company's need to reduce its borrowings was highlighted by third-quarter earnings which were blighted by a tripling of interest payments.
Shrugging off concerns about waning investor appetite for mobile phone operators, Chief Executive Peter Bonfield said the issue of BT Cellnet shares and other measures would trim its debt by the end of the year.
British Telecom's debts, which it racked up by buying high-speed mobile licences and additional stakes in international carriers, will hit about £30 billion by the end of March, the company said. With the bill for some past spending yet to come in, debt stood at £19.1 billion at the end of December.
BT's interest bill in the the quarter tripled from £110 million to £364 million.
The initial public offering of the wireless unit and funds raised from an IPO of its stake in Spanish mobile operator Airtel will raise £5 billion to £6 billion, Philip Hampton, BT finance director, said on a conference call. BT's sale of Asian businesses outside Japan will bring in the remainder of the £10 billion, he said.
The float plans and expected fund raising came as BT's profit before tax and one-off items for the three months ended December 31 crashed to £326 million, from £665 million in the year earlier period.
 Earnings per share before one-off items and goodwill amortisation came in at 4.3 pence from 8.0 pence in the third quarter of 1999.
"The lower earnings in the current period were mainly due to higher interest charges following BT's acquisition of businesses and third generation mobile licences over the year," BT said.
BT shares were down 5.4 percent at 642 pence in London trade.
The BT executives also said the company plans to spin-off its directory business Yell through a demerger of 90 percent followed by an IPO of the remaining 10 percent.
BT revenue for the third quarter rose 10.8 percent to £5.25 billion.
--from staff and wire reports 
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