Bloomberg News

BT Targets Dividend Increase as Operating Profit Gains

May 10, 2012

Ian Livingston, chief executive officer of BT Group Plc. Photographer: Denis Doyle/Bloomberg

Ian Livingston, chief executive officer of BT Group Plc. Photographer: Denis Doyle/Bloomberg

BT Group Plc (BT/A), the U.K.’s largest fixed-line phone company, forecast revenue will continue to decline next year after fourth-quarter sales declined more than estimated by analysts. The stock dropped as much as 3.2 percent.

Revenue excluding additional charges will only show an “improving trend” in 2013 and 2014, BT said in a statement today. The company last year said revenue would grow by as much as 2 percent in 2013.

The company, based in London, has deepened cost cuts and accelerated its 2.5 billion-pound ($4 billion) rollout of fiber broadband by one year to counter declining revenue at its fixed- line phone business. Fourth-quarter sales dropped 4 percent to 4.88 billion pounds, missing the average estimate of analysts in a Bloomberg survey for 4.91 billion pounds.

“While the company expects an improvement in core revenue decline, it is no longer targeting positive growth,” said Simon Weeden, an analyst at Citigroup Global Markets Ltd.

The stock declined as much as 6.90 pence to 210.30 pence, the biggest intraday drop since April 23, and was down 2.5 percent as of 8:56 a.m. in London trading. Before today, the stock had gained 14 percent this year, valuing BT at 16.9 billion pounds.

The company also said today it will raise its payout to shareholders by between 10 percent and 15 percent each year for the next three years. Earnings before interest, taxes, depreciation, amortization and costs from job cuts climbed to 1.61 billion pounds in the three months through March.

Pension Deficit

BT has said it planned to halve its 3.9 billion-pound pension deficit, allowing it to consider paying a higher dividend. BT has sought to move away from past criticism over its pension funding, with the regulator saying in 2010 it had “substantial concerns” over the payment of the shortfall.

Stuart Gordon, an analyst at Berenberg Bank in London, said BT has raised its dividend to just below the level that would require additional pension funding.

“Our financial strength has allowed us to invest in the business, make a 2 billion-pound payment into the pension fund, reward employees and deliver double-digit growth in shareholder returns,” BT Chief Executive Officer Ian Livingston said in the statement.

BT has stepped up competition with operators including Virgin Media Inc. (VMED:US) as it signed up 131,000 additional high-speed fiber broadband customers in the quarter.

To contact the reporter on this story: Jonathan Browning in London

To contact the editor responsible for this story: Kenneth Wong at

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