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* Scraps dividend until 2021/22 to weather coronavirus
* Move strengthens balance sheet for fibre investment
* Shares fall 4.5%
(Adds CEO comments, shares)
By Kate Holton and Paul Sandle
LONDON, May 7 (Reuters) - Britain's biggest telecoms group
BT suspended its dividend and said it would spend
billions more on faster fibre broadband connections, on the day
two of its major competitors announced plans to merge.
The company said the saving from suspending its dividend
until 2021/22 would see it through the expected financial crash
caused by the coronavirus pandemic, which is leading to lower
revenue from sports customers, reduced business activity and
more cautious spending from multinational customers.
It will also help fund a 12 billion pound ($15 billion) plan
to upgrade its legacy copper network to full fibre. If the
conditions are right, BT said it could reach 20 million premises
by the mid to late 2020s, 5 million more than it had targeted.
On the day rivals Telefonica and Liberty Global
announced plans to merger their British units to build
a stronger challenger, BT also set out plans for a new five-year
programme to modernise the business.
Chief Executive Philip Jansen said the coronavirus pandemic,
which has seen a surge in the use of mobile phones and data, had
brought BT's national leadership in telecoms into the sharpest
focus in its history, and while upgrading the network had been
important before, it was now "a matter of extreme urgency".
Therefore, the dividend - one of the biggest on the London
stock exchange - had to be pulled.
"This was a tough decision, but although hard on
shareholders, a necessary one so that we can allocate capital
for value-enhancing investments," he told reporters.
"It will also allow us to manage confidently through the
coronavirus crisis."
He said the impact of the pandemic would only become clearer
as the economic consequences unfolded over the next 12 months.
"Due to COVID-19, BT is not providing guidance for 2020/21,
at this time," he added, referring to the respiratory disease
caused by the new coronavirus.
Shares in BT, which were yielding 13.5% based on the 15.4
pence full-year dividend the company had planned to pay, were
down 4.5% at 108.5 pence at 0735 GMT.
BT's new efficiency programme will cost 1.3 billion pounds
to achieve, but will deliver annualised gross benefits of 2
billion pounds by March 2025 as it switches off many legacy
programmes and uses new technologies to improve.
The company, which owns the EE mobile network and Britain's
biggest fixed-line network under its Openreach unit, said it
expected to resume dividend payments at 7.7 pence per share.
BT's adjusted revenues for 2019/20 fell 3% to 22.8 billion
pounds and core earnings dropped 3% to 7.9 billion pounds, both
meeting market expectations.
($1 = 0.8068 pounds)
(Reporting by Kate Holton and Paul Sandle; editing by Guy
Faulconbridge and Mark Potter)
