BT plays down threat from internet telephony

Ben Verwaayen, BT chief executive, on Thursday downplayed the threat from low-cost telephony over the internet, insisting that the company was well positioned in a highly competitive market.

This was intended to send a clear signal to investors that BT, the former state-owned UK group, was not facing the same threat as France Telecom, which issued a profits warning after underestimating the impact from companies selling internet telephony using technology known as VoIP.

“The difference between VoIP prices and existing [voice] pricing [in the UK] is by no means comparable to that in other countries,” Mr Verwaayen said.

He estimated that internet telephony accounted for about 1 per cent of call volumes in the UK and insisted that BT’s own VoIP offerings undercut those of rivals such as Skype and Vonage.

BT has 300,000 paying customers with VoIP accounts. “VoIP is not about the destruction of old technology, it is about enhancing services via broadband,” Mr Verwaayen said. His comments came as BT revealed that its share of net additions in the broadband market, excluding cable providers, was 28 per cent, in the three months to the end of December, up from 25 per cent in the preceding three months.

Gains from broadband and other so-called “new wave” services enabled by faster internet connections as well as corporate IT services, mitigated continued decline in traditional telephony, which now accounts for only 15 per cent of BT’s total revenues.

For the first nine months, BT pre-tax profits fell from £1.8bn to £1.5bn ($2.6bn) on revenues up 6 per cent from £13.8bn to £14.6bn.

For the third quarter, BT reported underlying earnings before interest, tax, depreciation and amortisation slightly down at £1.4bn, in line with expectations.

It will reveal the results of its tri-annual actuarial review of its pension scheme in May. At the last review in 2002, it had an actuarial deficit, before tax, of £2.1bn. At the end of December the deficit, calculated according to latest IAS 19 accounting rules, was £4.3bn before tax.