Telecoms giant BT has reported a 31 per cent plunge in profits after a year of high investment and fierce competition.

Profits before tax in the year to March 31 fell to £2.94 billion, down from £4.29 billion reported in 1999. The fall in profits appeared worse because of one-off income of more than £1 billion in the previous year's results.

But the company said the falls were also due to higher interest payments after it bought up the half of BT Cellnet it did not already own last year and price cuts across its business. But while profits were squeezed, the surge in internet and mobile phone use helped send turnover up by more than a fifth.

Total turnover in the year to March was £21.9 billion, up from £18.2 billion last year. BT saw massive growth in its mobile business where turnover grew by 55 per cent. But its fixed line business saw turnover fall as a results of price cuts, which the company said totalled £500 million over the year.

Most of the cuts came from the 25 per cent reduction in charges for calling a mobile phone from a fixed line. The cuts were introduced in April 1999 after a Competition Commission inquiry into the charges.

Finance director Robert Brace said he expected the price of phone calls to keep falling in the future.

"I think prices of fixed-line voice calls will continue to come down as competition takes hold. At the same time there is high growth in mobile and Internet."

He added: "The trick is to invest in the future and grow the business without trashing your profits. Our 20 per cent sales growth is probably greater than any other telephone company in the world."

BT is currently taking legal action against the Government over the recent auction of new mobile phone licences.

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.