Struggling BT Gets A Lift From Cash-Strapped MOD

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A £99m, five year contract could help off-set BT’s poor performance over the 12 months

After announcing tens of thousands of workers would go and an annual loss of £134m for 2008, BT finally had some good news for shareholders and staff this week with the announcement of a five year contract worth around £99m courtesy of the Ministry of Defence.

In a statement BT said that the contract involves supporting communications across 197 military bases with the telecoms and services giant charged with managing voice and data networks in more than a quarter of a million MOD buildings, communications rooms and “underground cable ducts”.

“We are delighted to be able to add this fully managed capability to the DFTS services we currently deliver for MOD. The work will help prepare the way for MOD’s planned long-term programme of communications development, and we eagerly anticipate its delivery of real benefit for our customer, ” said Simon Patten, director BT Defence and Security.

The DFTS – the military loves acronyms almost as much as the IT industry – is an existing agreement between BT and the MOD with the new contract will be based around improving the continuity of the existing technology including systems management.

“The commencement of this service for Defence represents a logical and significant step forward in the continuing modernisation and rationalisation of the fixed communication network infrastructure which began in 1997. My team looks forward to working with BT on this project which is a vital element in the UK’s operational capability worldwide,” said Darrell Midgley, head of the MOD’s Defence Equipment and Support’s Networks Team.

Earlier this week, BT chairman Sir Michael Rake told BT shareholders at the company’s annual general meeting that it was focused on cost-cutting, improving customer service and generating returns for shareholders. “The Board is committed to delivering attractive returns for shareholders. We believe that operational improvements in the business will generate sufficient cash flow to allow the dividend to grow at the same time as we invest in the business, reduce debt and support the pension scheme,” he said.

In May BT announced plans to lay off 15,000 staff after it reported an annual loss of £134m. The company had already shed around 15,000 jobs which was about 5000 more than had been expected by industry watchers.

Although the MOD deal comes at a fortuitous time for BT, questions might be asked about whether now is the right time for the MOD to be allocating tens of millions on “supporting” communications systems when numerous reports in recent months have focused on the lack of adequate equipment for front-line troops in Iraq and Afghanistan.