City welcomes BT share buyback topping £2.5bn

BT IS to return an extra £2.5 billion to shareholders through a share buyback as it revealed it had retaken top spot in the UK broadband market.

The buyback is 500 million more than analysts had estimated and represents around 10 per cent of the company's market cap. BT also increased its total dividend to 15.1p, an increase of 27 per cent on a year ago, achieving the promise of paying out two-thirds of earnings per share a year earlier than planned.

The former state monopoly yesterday revealed the larger-than-expected payout as it reported its fifth consecutive quarter of year on year earnings, leading to a profit of 2.49bn, an increase of 15 per cent. BT said its total revenue for the year to 31 March was 20.2bn, with a decline in revenue from traditional phone lines more than offset by an increase in "new wave" such as broadband.

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The fourth quarter saw the company add 245,000 new customers, while 195,000 further customers were added when it bought PlusNet.

Yesterday BT trumpeted that it had regained top spot in broadband retail, overtaking Virgin Media and NTL:Telewest, with 3.66 million customers, around 26 per cent of the market. It also revealed its largest ever contract to provide wholesale communications services for the Post Office. The ten-year contract is valued at 10m.

While the results were in line, its shares led the FTSE-100 fallers, with shares off 9p to 306.25p, blamed partly on the announcement it faces a 450m internal restructuring charge, most of which will come in the current year, with payback expected in two to three years.

Chief executive Ben Verwaayen also disappointed the market by confirming the company was not in talks for a takeover, with private equity bids speculated recently.

Most analysts welcomed the financial results, with Jim McCafferty, of Seymour Pierce labelling the dividend payout "cracking". He said: "We see this combination of strong earnings growth and a high level of absolute dividend and dividend growth as a quality which should command a higher rating."

Voluntary repayments and booming stock markets have left BT's pension fund with a surplus of an estimated 1bn.

Retiring chairman Sir Christopher Bland gave the company a positive outlook in his last results presentation before retirement in September.

"BT continues to grow faster than most of its peers and is far less reliant on voice revenue," he told investors

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Bland received a standing ovation at yesterday's presentation to analysts and the media, after a major turnaround during his tenure. He came into BT in 2001, immediately overseeing a 6bn rights issue rescue, the company harboured by a debt of 29bn and attacked for the lack of a clear broadband strategy.