Crunch, crunch, crunch

31 October 2008 By Una Galani Follow @ugalani

A profitwarning and the resignation of François Barrault, head of the telecom group s muchheralded services growth engine, are bad news. Costs are out of control. Add worries about how the credit crunch is hurting BT s pension fund, and investors are right to run scared.

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BT shares fell 20% on Friday after it issued a profitwarning the head of the telecom group's Global Services unit resigned with immediate effect.

The telecoms group said the unit had been hit by a slowerthanexpected delivery of efficiency savings and a continued decline in its higher margin UK business.

In its upcoming secondquarter earnings, BT expects revenue growth at Global Services to remain strong, but ebitda of around £120m to be significantly below expectations.

Overall, BT expects group revenues will be ahead of expectation, with all of its remaining units BT Retail, BT Wholesale and Openreach to perform inline or above.

Chief Financial Officer Hanif Lalani will replace Francois Barrault at Global Services.

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