BT shares in a spin over write-down fear

BT was the FTSE 100 Index's worst performer in early trading - down almost 6% near record lows at one point - following the weekend reports, although it later clawed back the losses to stand 2% ahead on the day.

The firm is said to be preparing the mammoth write-down on the value of contracts at its global services arm, which provides IT networks to multinational businesses, and could axe as many as 10,000 more jobs.

There is also speculation that BT - labouring under a huge pension fund deficit - will cut dividend payouts to shareholders at annual results on May 14.

This move would hit thousands of the firm's smaller investors. Around 38% of BT's shareholders - more than 400,000 people - hold less than 400 shares in the firm, which listed on the stock market in November 1984.

BT has already announced £340 million of provisions in February's third-quarter results after taking a more cautious view of progress on cost savings and the performance of the division's contracts.

This write-down relates to 15 of its 17 biggest contracts, although the biggest headache yet to come for BT is said to be its work on the £12.7 billion overhaul of the NHS's computer system.

Other contractors on the project have quit, writing off hundreds of millions of pounds in the process, according to reports.

Meanwhile the group, which has already made 6,000 contractors redundant during the past few months, has introduced harsh new terms for workers in global services - including pay cuts of between 10% and 30% - to cut costs.

Although its other businesses are performing well, BT first signalled the problems at the global services division last October, sending its shares into a tailspin.

The firm has also launched an overhaul of its 69,000-strong pension scheme, which had a deficit of £1.7 billion as of February.