BRITISH Telecommunications reported a small drop in first quarter profits yesterday as it prepared to reveal whether it would accept a new package of price and trading regulations.

Pre-tax profit for the three months to June 30th stood at £869 million sterling, down from £874 million in the first quarter last year, on turnover up 4.1 percent to £3.64 billion.

BT said the fall in headline profits was the result of a rise in charges from its long standing redundancy programme to £52 million against the £22 million recorded in the same quarter last year.

But it refused to divulge what its response would be to the set of proposals announced by regulatory body Oftel last week which, if rejected by BT, would be sent to Britain's Monopolies and Mergers Commission for a potentially lengthy enquiry.

"We have no comment apart from what we said before," BT finance director Mr Robert Brace said in an interview, adding that BT expected to make a final decision "in the next week or so".

Oftel chief executive Mr Don Cruickshank has set August 2nd as the last date for BT's response, but the company has said it does not regard that as a deadline it must adhere to.

BT has criticised a condition Oftel wants to introduce into its licence that would give Oftel wider powers to assess and stamp out what it views as unfair behaviour.

The phone group is also unhappy with a new price capping formula set to take effect next year which, while ostensibly less tough than current restrictions, is focused on low spending domestic customers who already offer poor margins for BT.

The new measures come as BT continues its fight to hold on to its core business both in national and international calls.

Inland call volume rose 6 percent during the quarter but the growth in revenue from these calls was just 2.3 per cent because of price cuts.