Broadband demand drives BT's profits up 71% to £1.7bn

TELECOMS giant BT said the growing importance of broadband in people's homes had led to a surge in year-end profits.

High-speed internet access was now becoming virtually another utility necessity for households and businesses, said chief executive Ian Livingston.

"Broadband is not just e-mails. It's social interaction, purchasing… broadband is more and more at the centre of peoples' lives, whether it's for homework or watching TV, and prices in the UK are still very, very competitive," he said.

Unveiling a 71 per cent leap in pre-tax profits to 1.7 billion, Scots-born Livingston revealed the company was making significant investment in the business.

He also had good news on the pensions deficit which has concerned investors in recent years. Pension trustees were now estimating that the funding deficit had reduced from 9bn at the end of 2008 to 3.2bn at the end of last year.

The pensions regulator had put on hold a review into the company's pension scheme repayments that will not restart until the end of this year.

Analysts said by that time BT will have started another three-yearly funding valuation which was likely to show the pension deficit to be much smaller.

Will Draper, telecoms analyst with Espirito Santo, said: "We had expected the pensions regulator to show his teeth in the next few months. But he now clearly won't. They're (BT] off the hook entirely until next year."

Livingston revealed the rise in profits came despite revenues falling 4 per cent to 20bn, as BT also took a further 1.1bn off its cost base against the chief executive's original target of 900 million.

The performance was stronger as the year progressed, with fourth-quarter profits nearly doubling to 495m.

That paved the way for a 7 per cent rise in the total dividend to 7.4p (from 6.9p) courtesy of a recommended 9 per cent rise in the final payment to 5p.

In the fourth quarter BT accounted for 162,000 of the 252,000 broadband customers who joined its network - its 64 per cent market share being its highest for eight years. Livingston hinted strongly that, apart from bolt-on acquisitions, BT did not expect to be involved in any major telecoms sector consolidation. "Most shareholder value is created by running companies better. Too many companies look like they are run by corporate financiers," he said.

Livingston added that BT continued to help multi-nationals expand, but that whereas in the past this was often a case of western companies expanding globally, he believed the next decade "will be the decade of Asian and Latin American multi-nationals."

"Asian banks, for instance, are expanding globally and BT is helping them," he added.

BT's shares closed down 2.9p at 199p.