BT May Cut Sales Forecast Amid Weaker Europe Performance
BT Group Plc (BT/A), the U.K.’s largest fixed-line phone company, may be forced to cut its sales forecast for the year after the recession hurt business from corporate customers.
An unfavorable regulatory pricing decision, which will reduce wholesale revenue, will contribute to the sales declines, said a person close to the company. London-based BT, which will report quarterly sales on Nov. 1, previously said it expected underlying revenue growth to improve in 2013 and 2014.
European businesses are hesitant to sign up for new contracts and those that do are committing to smaller-than-usual deals, Chief Executive Officer Ian Livingston said in July. The biggest contract BT won in the first half of 2012 was about 50 million pounds ($80 million) compared with deals valued at “three-figure millions” in a typical year, Livingston said. BT spokesman Dan Thomas declined to comment before results.
“The extent of the cut will be critical as we have argued that in the current environment, where revenue decline is accelerating, BT will struggle to accelerate cost cuts to meet longer term” forecasts, Saeed Baradar, an analyst at Societe Generale in London, said in a note today.
The Sunday Times reported the sales cut earlier today.
Underlying sales, which exclude low-margin traffic that regulators require BT to carry, will drop about 4.5 percent for the year ended March 2013 to 18.5 billion pounds, according to 21 analysts surveyed by Bloomberg. The company’s global services business, which makes up 40 percent of revenue, has been disrupted as corporate customers cut employees and phone lines. BT had reported a 1.9 percent sales decline in fiscal 2012 from a year earlier.
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