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Britain's BT targets more cuts to pay for fibre build

By Paul Sandle

LONDON (Reuters) -Britain's BT said it would leave "no stone unturned" to find savings to maintain the pace of building its fibre network as labour and energy costs rise, increasing its capex bill and putting pressure on its cash flow.

The country's biggest broadband and mobile operator is "building like fury" to take fibre broadband to 25 million premises by 2026 in a race with rival Virgin Media O2 and smaller alternative networks.

Chief Executive Philip Jansen said "despite higher inflation, rising energy costs and macroeconomic uncertainty, we are ploughing ahead with a once in a generation investment".

Shares in the company, which are down 10% over the past 12 months, fell 8% to a near two-year low of 117 pence, as investors baulked at the increasing cost.

The impact of inflation on the rollout, which has already reached 8.8 million premises and is increasing at a rate of 62,000 a week, meant capital expenditure would be around 5 billion pounds this year, 200 million pounds more than expected.

Jansen said a tax credit would enable the cost to be absorbed in its free cash flow guidance, but the outcome for the year would likely be at the lower end of its 1.3 billion pounds to 1.5 billion pounds range.

He said BT needed to increase its cost savings target by 500 million pounds to 3 billion pounds by its 2025 fiscal year, with savings across the business.

Some jobs would be lost but there would be no "knee jerk" restructuring, he said, and attrition would be used as much as possible to reduce headcount.

"Everyone's going to have to share the pain on the cost savings," he said. "Literally all 100,000 people in BT need to look at the costs they can influence."

BT's workers are already in dispute with management over pay, and they have walked out for eight days in recent months.

Jansen said the company was in constant dialogue with its union about resolving the situation.

BT reported a 1% rise in adjusted revenue to 10.4 billion pounds ($11.8 billion) for the six months to end-September after growth in its consumer and Openreach networks arm offset lower spending by large corporate customers and its BT Sport disposal.

Adjusted core earnings rose 3% to 3.9 billion pounds, helped by strong cost controls in an increasingly inflationary environment, it said.

($1 = 0.8800 pounds)

(Reporting by Paul Sandle; editing by Sarah Young and Bernadette Baum)