by Leo King

BT Global Services remains a loss for BT

Nov 11, 2009
IT LeadershipIT StrategyTelecommunications Industry

BT Global Servicesrecorded losses of £96 million in the second quarter of the year, and accelerated cost cutting, prompting speculation the group may eventually part sell the division.

The unit, which provides IT services, narrowed losses from a £124 million deficit in the previous quarter, and beat analyst expectations.

But in spite of a £2 billion revenue, the results still dragged on the proftiability of the whole company, which reported a £550 million operating profit. All BT divisions apart from Global Services recorded a profit.

Problems at the unit with its £1.57 billion contract with the NHS and its £1.7 billion deal with Thomson Reuters have hurt results in recent months, according to reports. BT declined to comment.

BT is working fast to make sure a workable patient administration system goes live at Kingston Hospital in the next three weeks, or it faces potential loss of the large contract if the NHS is not satisfied. BT told CIO sister title Computerworld UK last week it was confident the system would go live on time.

Not as much is publicly known about the problems with BT’s £1.7 billion contract with Thomson Reuters, under which it is providing network services for the company to deliver to 330,000 clients.

The company has been cutting staff aggressively, removing 15,000 jobs primarily in Global Services, as part of a bid to cut annual costs by £1 billion. Today it said it would accelerate cost cutting, targeting over £1.5 billion in cost reductions, and would also look for “higher quality new business”.

Costs had been reduced by over £900 million in the first six months of the financial year, to 30 September. But Ian Livingston, chief executive, said in a statement to investors that there “remains a lot more to do”.

With the increased cost cuts, analysts speculated today that BT may be attempting to shape parts of the Global Services division into an attractive takeover target for other companies.

Richard Holway, chairman at analyst house TechMarketView, said: “My own view is that BT are clearing up parts of BT Global Services for a sale when valuations improve. They at least seem to be on the right road to achieve this.”

He called the results “bad but not as bad as expected”, noting that “informal” feedback from within BT was that the company was “on the right road”.