UPDATE 4-UK's BT Group to miss earnings forecasts, shares crash

* To miss Q2 EBITDA, EPS forecasts * Shares down more tham 20 percent * Global Services boss to leave (Adds reaction, shares)

By Kate Holton

LONDON, Oct 31 (Reuters) - Britain's BT Group Plc warned it would miss earnings forecasts due to the poor performance of its unit which provides network services to multinational companies, sending its shares crashing to a more than 20-year low.

BT's (BT.L) Global Services unit had been a strong driver of growth in recent years and BT said the problems were linked to operational failures and not the wider financial turmoil. It said the boss of the division, Francois Barrault, had resigned.

"The stock has just seen its engine of growth (Global Services) go into contraction, and its earning and cashflow are set to deteriorate," said analyst Saeed Baradar at Societe Generale. "It is now hard to see any bottom for this stock."

Group Chief Executive Ian Livingston said the results in the Global Services unit had been particularly disappointing. "We acknowledge that the performance in this part of the group is unsatisfactory and are committed to taking decisive action to rectify the situation," he said.

BT shares were down 26.4 percent at 104.6 pence at 1033 GMT, having slumped to a more than 20-year low of 100.2p. At its peak in late 1999 the stock was worth over 1,050p, since when it has demerged its mobile unit, now known as O2.

BT said it expected to report group revenue ahead of forecasts when it announces second-quarter results on Nov. 13, but earnings per share and earnings before interest, tax, depreciation and amortisation (EBITDA) would be slightly below expectations.

Global Services, where Group Finance Director Hanif Lalani will replace Barrault as head, will report EBITDA of around 120 million pounds compared with a consensus of 200 million.

For the full year, it expects group EBITDA to show a small decline compared with last year, with the consequent impact on earnings per share and free cash flow.

"We expect revenue growth in this division will remain strong, up 15 per cent year on year, but EBITDA of around 120 million pounds ($198.2 million) will be significantly below expectations," the group said.

In a note, analysts at Cazenove said investors were likely to be concerned that a rapidly deteriorating UK economy could hit BT's future operational performance. In addition, the pension scheme's funding position looks to have deteriorated sharply in recent months, it said.

"Taken together, these issues present significant risks to BT's future cash flows and hence are likely to outweigh any debate regarding attractive headline valuation metrics."

TESTING TIMES

BT said Global Services was now expected to produce an earnings margin in the range of 7 percent to 8 percent for the current financial year, compared with its closely-watched medium term target of 15 percent.