Comments on BT's role in GTE/MCI merger proposal:
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LONDON, Oct 24 (Reuters) - Around 230 million pounds of
charges will help send second quarter pre-tax profits at British
Telecommunications Plc BT.L sliding by about 13 percent next
Thursday, analysts forecast.
Experts pencilled in pre-tax profits after exceptionals of
between 624 and 650 million pounds -- down from 730 million in
the same period last year. Half-year pre-tax profits of 1.51 to
1.53 billion are forecast against a post-exceptional 1.6 billion
pounds last time.
But stripping out charges, analysts expect BT -- which is
embroiled in a takeover battle with two counterbidders for its
U.S. partner MCI Communications MCIC.O -- to brush off some of
the effects of rising competition and report low to mid single
digit growth.
Half-year dividend is forecast to fall to 7.5 to 7.55p
against 7.9p last time. BT, which posted first quarter pre-tax
profits of 881 million, has said pay-out will be lower this year
following a special dividend.
Exceptionals are expected to include a redundancy charge of
around 15 million pounds, 50-75 million pounds of reorganisation
charges at MCI and a 120 million charge for the losses on
conversion of BT employees share options to compensate for the
35p special dividend.
Development costs of so-called Project Force -- the
problematic and much-delayed new billing system of BT's
60-percent owned mobile subsidiary Cellnet -- is also expected
to help ring up costs.
BT noted in June that falling prices, stiffer competition,
start-up costs of European joint ventures and a lower
contribution from MCI had all helped to keep a lid on profits so
far.
Nevertheless, most analysts said they expected inland and
international telephone call volume growth over a 12 month
period to remain at eight percent.
"What BT is doing quite successfully is advertising to grow
the market overall so that it can absorb market-share erosion
and still produce half-decent numbers," said one analyst, who
declined to be named.
With MCI facing two counterbids that trump BT's own agreed
merger terms, the subject closest to analysts' hearts is whether
the UK group can salvage its global expansion plans by falling
in league with one of its counterbidders -- GTE Corp GTE.N of
the U.S..
But BT, which already owns 20 percent of MCI and states only
that its global expansion plans are on track, is restricted by
U.S. rules from divulging plans.
Few experts believe the company will shed any light on how
the first formal talks are progressing in the U.S. between BT,
MCI, GTE and another bidder for MCI -- U.S. carrier, WorldCom
Inc WCOM.O.
But, some said if BT could clinch a deal with MCI and GTE,
the group could win access to the vital U.S. markets without the
financial risk of buying MCI outright.
SBC Warburg believes BT has a fundamental value of at least
550p per share and said a well-executed deal with GTE could
trigger market realisation of the value of its international
holdings. But the broker said uncertainties might weigh on the
stock in the short-term.
BT's shares were trading little changed at around 473p on
Friday morning.
-- Kirstin Ridley, London Newsroom +44 171 542 7987
REUTERS
Rtr 06:54 10-24-97 |
