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BT shares rise after costs slashed faster than expected

BT
BT

BT shares have surged after meeting its cost-cutting target 18 months early as the telecoms giant braces for a potential takeover bid by French billionaire Patrick Drahi.

The FTSE 100 firm soared as much as 7pc to 148.5 as it confirmed a Sunday Telegraph report that its £1bn modernisation plan was ahead of schedule.

Revealing its progress ahead of second-quarter results on Thursday, BT said: "Further to weekend press speculation, BT confirms that it has delivered on its £1bn of gross annualised cost savings 18 months ahead of the March 2023 target."

The announcement comes as the BT board grapples with whether to announce new cost-saving targets immediately or to wait until December when Mr Drahi, its biggest shareholder, could make a takeover bid.

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BT is considering whether to increase its overall savings target or give details of the next phase of its redundancy plans.

The company has been working through 13,000 job cuts but is expected to go further as it overhauls its processes and rationalises its sprawling network of offices.

However, Jerry Dellis, the Jefferies analyst, said BT's results could be trumped by Virgin Media O2, which is also updating on performance.

"A solid print [from BT] could be overtaken by a Virgin Media O2 network update," he said.

"Virgin Media O2 have a history results day revelations. Limited footprint expansion with a financial partner seems most likely, a Sky commitment less likely, but the situation is uncertain.

"There is a pressing need for BT to be proactive. Any cost savings upgrade needs to be connected to guidance. Moreover, we look for BT to provide visibility on Openreach full fibre to the premise uptake among non-BT internet service providers now that Equinox pricing is live."

It is understood senior BT figures want to let Mr Drahi make a move before making any fresh commitments on cost.

Billionaire Patrick Drahi has expressed interest in BT - MARTIN BUREAU / AFP
Billionaire Patrick Drahi has expressed interest in BT - MARTIN BUREAU / AFP

The 58-year-old Frenchman is known in the telecoms sector as an enthusiastic cost cutter, and short of making a takeover bid could agitate for more aggressive restructuring. Mr Drahi has so far presented a friendly face to BT and recently attended a management presentation.

The company is on high alert regardless, exploring radical moves including a spin-off of its consumer arm.

BT recently hired bankers from the boutique investment bank Robey Warshaw, as boss Philip Jansen battens down the hatches amid growing concern over Mr Drahi’s intentions.

The FTSE 100 firm has been waiting for Mr Drahi to show his hand after seizing a 12.1pc stake worth £2bn in June.

It is also awaiting its new chairman, the former ITV chief executive Adam Crozier, who is due to take the helm days before the restrictions on Mr Drahi being able to make a bid are lifted.

The founder of the French broadband challenger Altice has been barred from bidding since June when he revealed he had built a 12pc stake but said he had no intention of making an offer.