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Telecommunications industry

British Telecom Posts $1.02 Billion Pre-Tax Profits, Avoids Drop Due to MCI Compensation

Strategic Insights

— 1 min read

British Telecom's strong growth in demand, driven by competitive pricing and strategic alliances, contributed to a significant rise in turnover and pre-tax profits. The company's ability to adapt to the liberalization of the European Union's telecommunications market has positioned it for further growth. However, intense competition has had a negative impact on residential line connections, and the company faces challenges in its domestic market.

Key Takeaways:

  • British Telecom reported pre-tax profits of $1.02 billion for the last three months of 1997, despite a drop in underlying profits due to the collapse of its bid for MCI.
  • The company's turnover rose from $3.76 billion to $3.93 billion, driven by increased line rentals, mobile phone services, and services to rival operators.
  • The failure to take over MCI will result in a profit of more than $4 billion when BT sells its 20-per-cent stake in MCI to WorldCom on completion of their merger.
  • Sir Iain Vallance, BT chairman, highlighted the company's strong growth in demand, driven by competitive pricing and strategic alliances.
  • BT is taking advantage of opportunities provided by the European Union's liberalization of the telecommunications market and is building significant capabilities through European strategic alliances.
  • Residential line connections fell by 340,000 over the nine-month period, due to intense competition, but the volume of international calls rose by eight per cent.
  • Cellnet saw its mobile phone connections rise by 303,000 to almost three million by the turn of the year.

Statistics:

  • Pre-tax profits: $1.02 billion
  • Turnover: $3.93 billion (up from $3.76 billion)
  • Taxable profits: $2.58 billion (up from $2.5 billion)
  • Rise in Latin American business: 65%
  • Rise in performance of joint venture GGAT: 43%
  • Number of mobile phone connections: almost three million
  • Increase in international calls: eight per cent
  • Decline in residential line connections: 340,000 over nine months
  • Price cuts: $560m and $230m

Sources:

  • BRITISH Telecom
  • WorldCo (as mentioned in the original text)

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