Ian Livingston, chief executive of BT, today said the telecoms giant is taking "decisive action" to turn round its Global Services division which forced the company to issue a shock profits warning last month.

He also said the group is in the process of cutting 10,000 jobs this year and plans to save £100 million a year in pension fund costs.

BT's headline earnings dropped 1% to £1.43 billion in the three months to September largely due to the 36% drop in earnings at Global Services, which provides multinational corporations and government agencies around the world with telecoms and IT services.

Livingston got rid of its chief executive François Barrault last month replacing him with the group's finance director Hanif Lalani. He said the division had chased growth across the world at the expense of watching the bottom line, so while revenues had soared profitability fell.

Livingston said: "In the latest quarter three out of our four businesses performed well and one performed badly. Profits in Global Services are simply not good enough and we are taking decisive action to put matters right."

Group revenues rose by 4% in the second quarter to £5.3 billion. The half-year dividend is unchanged at 5.4p paid out of earnings that were 3% down at 5.9p per share.

Livingston said he expects the group to show a modest rise in revenues for the full year but due to the failings at Global Services headline earnings were likely to "show a small decline".

He said the job cuts would be largely targeted at indirect workers who were either on contracts with BT, worked for agencies or were offshore.

BT has agreed a deal with its trade unions to alter the terms of its pension scheme to save it around £100 million a year. This will see the retirement age lifted to 65, larger contributions from employees and a switch from final salary to average career salary pensions.