Bland to leave BT with bang in £2bn buyback

Published on Sunday 13 May 2007 01:13

BT IS expected to announce plans to return up to £2bn to shareholders via a share buyback or a pledge to increase dividend payments when it reports annual results this week.

Analysts believe chairman Sir Christopher Bland, who retires in September, will use Thursday's results to underline progress made during his six-year stint at the helm with proposals designed to improve BT's share price.

The company is expected to report increased sales and earnings in the fourth quarter and say full-year pre-tax profits have risen from 2.18bn in 2006 to 2.55bn this year.

John Clarke, analyst at Brewin Dolphin, said: "Sir Christopher will want to see his last set of results out with a bang. He will, I'm sure, want to give a steer on future dividend increases."

Analysts at Lehman Brothers said: "We are confident about our existing assumption of a 2bn share buyback to be announced with May's full-year results."

A 2bn share buyback would dwarf the 1bn of shares bought over the past three years, during which the group has paid out around 3bn in dividends.

Another focus this week will be how BT is competing with rivals including BSkyB, Virgin Media and Carphone Warehouse in the residential broadband and fixed line telephony market.

Clarke at Brewin Dolphin said some in the City were concerned this competition would hit BT's revenues in the current financial year. He said: "Such is the fear of competition from Carphone Warehouse, Sky and Virgin Media etc that some analysts are forecasting revenue growth of 1.2%. I believe that's pessimistic, although the 5% in the last quarter was exceptionally good."

Jim McCafferty, analyst at Seymour Pierce, said: "We believe BT's superior customer service and reliability will see it maintain this leadership."

Some believe plans to return cash to shareholders are designed to ensure BT's share price doesn't suffer following Bland's departure. Shares slipped 1.25p to close at 318.25p on Friday.

When Bland joined BT in May 2001, the company was saddled with debts of 30bn. He launched a massive rights issue to get the business back into shape and is credited with leading the group's transformation. Bland is being replaced by Sir Mike Rake, the former head of KPMG.

BT is moving away from its roots as a fixed-line telecoms group. New wave revenues, such as broadband and corporate IT services, now account for more than a third of turnover.