BT counts cost of TV quiz scandal

Chief executive Ben Verwaayen admitted there had been a shortfall in the group's wholesale business in the third quarter as rival broadband suppliers switched from BT to their own circuits, mobile phone companies used BT less to route their own calls and phone-in revenues dried up.

"This is all very low margin business," he said. "Transit calls - where a call from an Orange subscriber to a Vodafone travels briefly through our network - earn margins of just 2%. Wholesale in total only accounts for 17% of our revenues."

Nevertheless, BT expects to be counting the cost of the TV phone-ins for another three quarters. In the last three months it lost out on around £10 million in revenues. BT itself has not been implicated in the scandal as it is merely the carrier of other people's services.

Industry regulator Ofcom has fined GMTV £2 million and Channel 4 £1.5 million for its Richard And Judy and Deal Or No Deal shows which allowed viewers to continue phoning in at premium rates when winners had been selected. As the scandal emerged, phone-in quizzes were suspended by ITV and the BBC.

BT said it had seen a reduction of £58 million in revenues from other phone companies using its lines and £51 million as rival broadband companies switched to their own technologies.

But despite this, Verwaayen said the group was storming ahead in its two main growth areas; global services and BT retail. Headline earnings were up with City forecasts at £1.47 billion - an increase of 2% - for the three months to the end of December. Total revenues were up just 1% at £5.15 billion.

Verwaayen added that BT is not worried about the downturn in the UK and US economies. He said: "With the softening of the economy, people need us more than ever as corporate customers seek to save costs. They are coming to us for network and platform solutions which avoid duplication."

He also dismissed reports that BT's pension fund is again becoming a problem, pointing out that over the 12 months to December 2007 it had swung from a deficit of £1.1 billion to a surplus of £700 million and that within the last few days that surplus had risen to more than £1 billion. At the same time, the fund has cut its exposure to equities from 50% to 40% as it takes a more cautious view.