£340m Global Services hit sparks BT rating worry

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BT said it would have to book a £340 million hit at the arm, which provides IT services to companies. The shares crashed more than 10% as chief executive Ian Livingston warned there would be further provisions in the hundreds of millions of pounds as part of an ongoing review of the unit.

Global Services has been under review since BT issued a shock profit warning in October because of its poor performance. That was followed by 10,000 job cuts and plans to reduce the cost of BT's pension scheme.

Analysts today moved to downgrade the company's share price and bonds, with some predicting credit rating agencies would quickly move to cut their rating on the company.

Roger Appleyard at RBC Credit Research predicted Standard & Poor's and Moody's would soon cut BT's rating from BBB plus to BBB, just two notches above junk status.

"Global Services was the growth engine for this business and it has just evaporated," he said.

As well as being a humiliation for the company, a one-notch ratings downgrade would mean BT's debt repayments would be about £10 million a year more expensive, but would also make it more costly to refinance through bond issues.

Away from Global Services, BT's trading was ahead of expectations.