British Telecom (NYSE:BT, news, filings) pre-announced today that they will take a £340M charge ($472M) in their Global Services (BTGS) division. Often such write-offs are for things like goodwill, and while they aren't great they are usually an acknowledgment of something the market already knows. That does not appear to be the case here. Rather, BTGS had to re-evaluate large contracts to "take into account a more cautious view of the recognition of cost efficiencies and other changes in assumptions and estimates, particularly in light of the current economic outlook."
Translation? The streamlining project the division has been working on for the past year went, shall we say, poorly. How poorly? £340M poorly. The economic crisis may have increased it a bit, but I think it's safe to say that even were the economy roaring along right now, they'd still be having a big write-off. And the company is still reviewing the numbers, more write-offs could be on the way.
Other BT divisions are not affected, with profits up 5% over the same period last year. EBITDA for BTGS is expected to be £17M for the quarter before the writeoff. This news from BTGS doesn't seem to be of the contagious variety, meaning it doesn't seem to bode ill for similar companies but is largely company specific. In fact, BTGS's continued struggles would seem to be a boon for competitors like Verizon (NYSE:VZ, news, filings) Business, AT&T (NYSE:T, news, filings), and upstarts like glbc - which may find it easier to sustain revenues during the downturn with BTGS still focused internally.
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