BT Group to miss earnings forecasts

By Kate Holton

LONDON (Reuters) - BT Group warned it would miss earnings forecasts due to the poor performance of its unit which provides network services to multinational companies, sending its shares crashing to a more than 20-year low.

BT's Global Services unit had been a strong driver of growth in recent years and BT said the problems were linked to operational failures and not the wider financial turmoil. It said the boss of the division, Francois Barrault, had resigned.

"The stock has just seen its engine of growth (Global Services) go into contraction, and its earning and cashflow are set to deteriorate," said analyst Saeed Baradar at Societe Generale. "It is now hard to see any bottom for this stock."

Group Chief Executive Ian Livingston said the results in the Global Services unit had been particularly disappointing. "We acknowledge that the performance in this part of the group is unsatisfactory and are committed to taking decisive action to rectify the situation," he said.

BT shares were down 26.4 percent at 104.6 pence at 10:33 a.m., having slumped to a more than 20-year low of 100.2p. At its peak in late 1999 the stock was worth over 1,050p, since when it has demerged its mobile unit, now known as O2.

BT said it expected to report group revenue ahead of forecasts when it announces second-quarter results on November 13, but earnings per share and earnings before interest, tax, depreciation and amortisation (EBITDA) would be slightly below expectations.

Global Services, where Group Finance Director Hanif Lalani will replace Barrault as head, will report EBITDA of around 120 million pounds compared with a consensus of 200 million.

For the full year, it expects group EBITDA to show a small decline compared with last year, with the consequent impact on earnings per share and free cash flow.