BT's Global Services takes a hit of £340 million

The UK's largest telecom company, British telecom saw its shares plunging by 15 per cent and wipe out £1.5 billion from the group's market value yesterday as it warned once again on profits for its Global Service division, which will force the telecom operator to take a one-off charge of £340 million ($469.5 million) and said more may follow.

Although the group's other divisions like BT Wholesale, BT Retail and OpenReach are expected to post better results than estimated, it will still not be enough to cover the massive decline at Global Services.

The operating profit at its Global Service division plunged to an estimated £17 million in the third quarter from £215 million for the same period last year.

The division has been under review since last October when the telecom group issued a profit warning due to the poor performance of the division.

The groups finance director Hanif Lalani who replaced François Barrault last October as the second quarter figures were dismissal, was asked to investigate the books and straighten the mess.

BT's boss, Ian Livingston said that ''The first job of the new management team in Global Services and the new group finance director has been to review the financial position of Global Services and its major contracts.'' said Livingstone.

''These ongoing reviews reflect changed circumstances and a more cautious view of the delivery of cost efficiencies and contract performance, particularly in the light of the current economic climate'' he added.

After reviewing 15 of the division's biggest contracts, he soon discovered that most of these complex contracts that last several years were contracted with poor returns, where the previous executives had sacrificed profit for growth.

The company said that following the outcome of the review, there may be further one-off charges for the third quarter results with ''substantial'' charges possible for the current financial year as the company is still talking to two its biggest customers and the outcome will be known only during the course of the fourth quarter.