A FALL in profits of pounds 94m would be a catastrophe for most companies. But British Telecommunications, churning out profits at the rate of pounds 2.6bn and more a year, is big enough to regard a setback of that size as merely a minor irritant, and the shares rose 5p to 408p on Thursday's news. But, as the subsequent relapse to 400p indicates, the longer-term question is how far shareholders are prepared to stomach such irritation as a tighsic grannies' yield stock: hi-tech yet rock-solid, throwing off cash like last year's fashion, producing a yield which the stock market is content to leave at a comfortable 5 per cent-plus.
Yet, with a tag of pounds 25bn, BT has slipped from being the stock market's most valuable company to a mere fourth. That owes something to the rising price of oil, which has helped British Petroleum and Shell to overtake BT, but it at least partly reflects doubts about the telephone stock.
The precipitious fall in the BT share price last year shows how lightly it is regarded by the investment community. That fall, from 490p to 350p, was no fault of the company. It mirrored the collapse of the bond market as interest rates rose. In other words, BT shares are seen by many as a synthetic fixed-interest security.
That is bad news for BT's chairman, Sir Iain Vallance, and the rest of his top management, for it means their efforts are being set at naught or, even worse, taken for granted.
To some extent, this is the price of being a stock market Goliath. But few regard Glaxo Wellcome, BP, or Shell so disparagingly, even though all three are as intimately bound up with international government policy as BT.
The group is so low-rated because it is a dual short-term and long-term play - and the London market, true to form, is concentrating on the short- term aspect.
In crude summary, the short-term interest lies in the UK, while the long- term prospects are bound up with BT's ability to become a global telecoms giant - or, rather, one of what will be a clutch of giants carving up the world's telephones.
At home, the group's strategists recognise that it faces a treadmill. It has to grow the market faster than it loses market share, which it inevitably must as regulatory restraints bite and competitors rush to fill the vacuum.
Hence Maureen Lipman and now Bob Hoskins, fronting expensive television ad campaigns designed to persuade us to use the phone more than we already do. In that context the fax is a godsend, encouraging a whole new area of telephone use that will grow as more people buy fax machines for their homes. Every extra call helps to mop up what has become a huge overhead of premises, staff and equipment.
However, the UK market will become more and more treacly for BT, for two reasons. In the first place, its …