High-profit BT plans big giveaway

BT is looking at ways to return cash to shareholders. The move comes just two years after the company won their backing for a £6 billion rights issue, the biggest in British corporate history.

The planned move will be seen as a reward to investors who backed chairman Sir Christopher Bland and Ben Verwaayen, his chief executive, and further evidence that the telecoms giant has gained control of its once-battered balance sheet.

One fund manager said institutions were already being sounded out about whether they would prefer a special dividend or a share buyback. 'The company is listening to shareholder views on ways to return cash,' he added.

BT, which is believed to have ruled out major acquisitions, already has a mandate from shareholders to repurchase and cancel up to a tenth of its shares each year - equivalent to buying up about £1.5 billion of its equity.

The company might also accelerate its dividend payment programme.

Christian Maher, analyst at investment bank Investec, said: 'It has said it will pay out 50% of earnings as dividends in 2005, but it looks as if it is ready to do so a year early.'

The news comes as BT prepares this week to reveal a 5% rise in first-half pre-tax profits to about £3 billion.

Bland is likely to be questioned about boardroom succession. He has already announced that he will stay another three years, but Dutchman Verwaayen's plans are less sure.

One City source said: 'He has done a quiet and efficient job, but no one expects him to stay more than another year or two.'

Verwaayen is likely to follow a political career in his home country.