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FTSE 100: BT warns of more job losses and price hikes to tackle inflation

General view of a British Telecom Homehub router, along with a telephone. BT is currently the 4th most valuable British brand, according to analysts Brand Finance's directory. Picture date: Friday March 10, 2017. Photo credit should read: Matt Crossick/ EMPICS Entertainment.
The boss of telecoms company BT has warned over further job cuts and price hikes. Photo: Matt Crossick/EMPICS Entertainment

BT (BT-A.L) has warned of more job cuts and a 3.9% price hike on top of inflation next year, after it raised its cost-saving target to £3bn ($3.37bn) amid soaring inflation and energy costs.

“We are leaving no stone unturned to make sure BT can be the most-efficient organisation it can be,” said Philip Jansen, the chief executive at BT.

The UK’s biggest broadband and mobile operator said it would save another £500m by the end of 2025, adding it was also taking steps to offset rocketing costs in the current year, including raising prices in its consumer arm and Openreach business.

“Inevitably it means some jobs will not exist in the future but that has been true of the last few years too. We will use natural attrition as much as we can. In these difficult conditions we know we have to double down on our costs. There are no specific numbers in mind. This [cost-cutting programme] is up until the end of 2025,” Jansen added.

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He declined to put a number on the job impact and stressed there would be no major restructuring, with the firm instead looking to reduce its overall workforce through normal staff turnover.

Jansen said that “everyone is going to have to share the pain”, including the group’s 100,000-strong workforce and customers.

He said that charges for most households are due to go up by 3.9% on top of inflation next year, while Openreach customers will also be affected by price hikes linked to inflation.

The group said it was looking to support struggling customers with the launch of a new mobile phone tariff for low-income households, offering a discounted rate of £12 a month, which adds to its existing broadband and fixed line social tariff.

BT has been hit by soaring energy costs in the past year. Its energy bill is set to be £200m higher this year.

BT shares were 6.1% lower at 119.90 pence each in London on Thursday morning.

The company reported an 18% slump in pre-tax profits from just over £1bn to £831m year-on-year in the six months to the end of September.

Adjusted core earnings rose 3% to £3.9bn, helped by strong cost controls in an increasingly inflationary environment, it said.

Victoria Scholar, head of investment at Interactive Investor, said: "The telecoms giant is grappling with pressures from rising inflation and fears of a recession, which is why BT is raising its cost savings target as a way to provision for the macroeconomic headwinds and to pay for the build of its fibre network.

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"BT has also been dealing with a series of challenges from rising interest rates given its heavy debt levels as well as an unhappy workforce resulting in a series of strikes amid a dispute over pay. Earlier this month, BT also reduced its group revenue guidance after the creation of its Warner Bros Discovery sports joint venture."

The firm is facing pressure from its workforce in a long-running row over pay, with BT and Openreach employees staging a fresh strike last month.

About 40,000 homes missed out on having their broadband connections completed on time due to ongoing strike action.

BT maintained its dividend with an interim payout of 2.31 pence per share.

Watch: 999 call handlers among BT and Openreach workers on strike over pay