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May 27, 2009

Layoffs: BT plans to cut 15,000 more jobs

LONDON: British telecoms carrier BT cut its dividend and announced 15,000 further job losses on Thursday after a 1.58 billion pound ($2.4 billio
n) writedown tipped it into a quarterly loss and its pension costs almost doubled.

The writedown is to be taken at its Global Services unit, which supplies the IT needs of multinational companies and which the company had for years striven to make its growth engine.

The group also said it would almost double its pension contributions to 525 million pounds ($794.1 million) a year.

BT, which has twice previously in the past year warned about profits at the Global Services unit, said earnings before interest, tax, depreciation and amortisation and contract and financial review charges were 1.35 billion pounds, down 14 per cent.

Profit before tax on an adjusted basis was down 40 per cent and on a reported basis showed a 1.28 billion pound loss. To help meet its increased pension obligations, BT cut its final dividend to 1.1 pence to give a full year dividend of 6.5 pence, which was down 59 per cent on last year.

The pension contributions will almost double from the previous 280 million pound annual payment to 525 million pounds a year for the next three financial years.

BT has been engaged in a three-yearly pension review to establish the size of its deficit and what it should contribute to the scheme on an annual basis, based on its asset values and liabilities.

The last review in 2006 put BT's deficit at 3.4 billion pounds and set annual contributions on a 10-year recovery plan at 280 million pounds. BT said on Thursday the contributions would rise to 525 million pounds but did not reveal the new deficit from the three-year review. A leading pensions expert said that BT's pension deficit now stood at 11 billion pounds.

BT said its triennial pension funding valuation was at an advanced state of completion. It did give its pension position at March 31 on an IAS
19 accounting basis as a deficit of 2.9 billion pounds net of tax, compared with a surplus of 2 billion pounds last year.

BT said its total labour workforce, of both permanent and contract staff, fell by 15,000 to 147,000 in March, 2009 and said they expected a similar number next year.

The job cuts were all voluntary and through not replacing staff and BT said they expected this to be the case next year.

"Although far from impressive, the worst seems to be out of the way for BT," Trader Manoj Ladwa said.

"Shareholders are likely to be encouraged by its dividend policy and measures undertaken to turn around its underperforming Global Services Division."
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