BT aims to clear £2.9bn pension deficit
BT announced today it was aiming to clear its pension deficit - as it reported a £134 million loss for the year.
The telecoms giant puts its pension deficit at £2.9 billion net of tax - or £4.0 billion gross of tax - compared with a surplus of £2.0 billion in March 2008.
The total size of its Pension Scheme assets stands at £29.3 billion - with liabilities of £33.1 billion.
BT stated it would make £525 million of pension contributions in each of the next three years to help cut the scheme's deficit.
However, some experts see BT was underestimating the size of its pension deficit.
Reuters reports pensions experts see the firm underestimating the deficit by as much as £7 billion.
BT today also reported with the falling profits, dividends will drop from 15.8p to 6.5p.
The firm is also cutting 15,000 jobs or ten per cent of staff.
Ian Livingston, BT chief executive, said: "I believe BT will emerge from the recession a stronger company to the benefit of our customers and shareholders."
He added the BT Global Services division where the lion's share of the losses comes from has started to turn around with new leadership.
Sir Mike Rake, BT chairman, said the deal for pension contributions will allow dividends to continue firmly.
"We have agreed with the trustees of the BT Pension Scheme the pension contributions for the next three years enabling the board to announce a sustainable dividend policy."
Retail stockbroker The Share Centre is now advises BT shareholders to sell - seeing citing better long-term opportunities within the telecoms sector elsewhere.
Nick Raynor, investment adviser at The Share Centre, said: "Today's announcement offers nothing but doom and gloom for shareholders after BT announced plans to axe 15,000 jobs and a severe cut to its yearly dividend following a significant annual loss.
"With a dismal dividend on offer and difficult trading conditions set to continue, we are advising BT shareholders to sell at present. Although BT's efforts to streamline the business may later help it turn the corner, it is too early to say when and if these measures will work."
He added investors looking for income and growth in the telecoms sector could do better with Vodafone - with the group's revenue increasing by over 14 per cent in the third quarter.
"Vodafone continues to satisfy both customers and income seekers by continuing to cut the price of calling abroad from the UK, and offering a stable dividend of over five per cent," he said.
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