BT is expected to unveil a further 10,000 jobs cuts, writedowns of about £1.5bn and a scaling back of its dividend when it announces its preliminary results next month as it takes an axe to costs and tries to turnaround its Global Services division.
The redundancies will be spread across the company's 150,000-member global workforce and follow the 10,000 jobs it has already chopped in the past year. Last month, BT announced a pay freeze for its 85,000 UK staff, including senior management.
The company's share price has tumbled to 81p, valuing BT at £6.3bn, and next month's results on 14 May are likely to be viewed as one of the nadirs in its history. However, some City analysts believe it could cull more than a further 12,000 jobs.
The company is expected to cut its dividend by up to 60 per cent. Its full-year profits are also likely to be hit by contribution to address a pension deficit of more than £8bn. A poor recent performance at Global Services, which provides IT and telecoms services to multi-national companies and government bodies, has hit BT hard.
For the third quarter to 31 December, Global Services suffered high costs, slow delivery of cost savings and contract review charges that resulted in an operating loss of £501m at the division, compared with profits of £22m the previous year.
BT is expected to reveal further writedowns at Global Services next month. The unit, which has 17 major contracts, said last month that overspending on three contracts led to charges of £336m. It added that two contracts are expected to run to "hundreds of millions of pounds" worth of losses each in the fourth quarter.
These two contracts are reported to be with the NHS and Reuters, the media organisation.
Of BT's three big contracts with the NHS over its ailing £12bn IT upgrade programme, two are thought to have gone well. But speculation centres on a third contract to install IT systems at hospitals in London, which it is reported will account for most of the write-offs. It is understood that BT's board believe they now have an opportunity to clear up its balance sheet. Yesterday, a BT spokesman declined to comment on job losses or writedowns, but said: "The company continues to be focused on cost control and will look at further efficiencies in the company."
Global Services, which employs about 37,000 people, was once viewed as the "jewel in the crown" at BT, but since October it has triggered two profits warnings.
For its third-quarter, BT's group pre-tax profits plunged by 81 per cent to £113m, as soaring costs and writedowns at Global Services took its toll.
In February, Ian Livingston, who took the helm as chief executive of BT in June 2008, said: "We have already announced major changes in management and are making significant financial and operational changes to the business."
Global Services over shadowed a robust third-quarter performance by BT's other three divisions, retail, whole and Openreach, which manages the first mile from telecoms exchanges to customers' premises.
In February, Mr. Livingston said: "Three of our businesses performed ahead of expectations in the quarter and the group, excluding Global Services, delivered the best year-on-year profit growth for five years."