Shares in BT plunged 12.65 per cent after revealing that pre-tax profits in the first quarter fell by 7 per cent as the telecoms giant revealed lower margins and a slide in its pension fund from surplus to deficit.

The UK telecoms giant revealed that pre-tax profits fell from £658 million in the first quarter of last year to £613 million from April to June 30 this year. Revenue rose by just 3 per cent to £5.1 billion.

Shares fell 25p to 172.5p, the lowest level since May 2004.

Presenting his first results as chief executive, Ian Livingston remained upbeat, reiterating the group's full-year outlook and said revenue was ahead of forecasts.

However, investors offloaded shares in the group because of weaker margins in its global services division, a sharply higher cash outflow and a move from surplus to deficit in the pension fund.

The company's £36.8 billion fund was in surplus by £1.4 billion in the first quarter of 2007. However, this has been reversed to a £600 million deficit.

BT’s Openreach division, which maintains the wires that connect homes and businesses to local telephone exchanges, has been hit by the housing slump in the UK.

Revenues for the division fell 1 per cent to £1.31 billion in the quarter, as fewer people moved home, although underlying earnings increased 2 per cent to £491 million.

Keith Bowman, an analyst at stockbrokers Hargreaves Lansdown, said: “For a perceived defensive stock, BT is really testing investors’ nerves.

“The earnings figures are at the low end of analysts’ forecasts, although new management is suggesting that investors hold their faith, given its estimate that full-year guidance will be met.”

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