BT pins hopes on cost-cutting moves to spark success at Ignite

BT IS this week expected to announce plans to turn around its loss-making pan-European business services division BT Ignite throughmeeting new cost-reduction targets.

Delivering his first strategy presentation to the City tomorrow ,BT's chief executive Ben Verwaayen is expected to reassureinstitutions that Ignite will break even in Europe by next Marchaccording to earnings before interest, tax, depreciation andamortisation (ebitda).

Cost-cutting measures previously announced in the division includethe loss of several hundred jobs in Germany.

However, JP Morgan predicted that no drastic action would betaken, since BT had already suggested Ignite would be given untilMarch 2003 to reach core earnings break-even.

JP Morgan said: "In addition, BT maintains that the offerings ofthis division are a key element of the service offering to its multi-national clients based in the UK, and therefore closure represents arisk to these relationships."

James Enck, telecoms analyst at Daiwa Institute of Research Europein London, agreed and said: "I'm reasonably sure that there won't beanything particularly dramatic on Monday."

In the nine months to the end of December, BT Ignite's Europeanoperations made ebitda losses of 94m pounds.

Verwaayen is also expected to announce his intention to focus onmore large corporate clients with less emphasis on small and medium-sized enterprises where potential margins are smaller.

The new Dutch CEO has already put provision of broadband access tohomes at the heart of BT's new focus, by more than halving BT'swholesale price for fast Internet connections.

Following Verwaayen's first strategy meeting with the Citytomorrow, BT Retail will announce on Wednesday details of a mobileoffering as part of its new plans.

BT Retail chief executive Pierre Danon and David Hughes, directorof mobile services, will unveil a new strategy that builds on itsexisting agreement to promote mmO2, BT's recently demerged mobilephone operations, to business customers for three years. Meanwhile,at Thus, the Glasgow-based telecoms company recently demerged fromScottishPower, shares rose by 5 per cent on Friday as bid speculationmounted.

Since the demerger, Los Angeles-based investment house The CapitalGroup of Companies has bought up a holding of over 4 per cent