BT's chief executive, Ian Livingston, has apologised for more than halving the dividend to shareholders, many of whom bought shares on privatisation in the 1980s, after its IT services business plunged the firm deep into the red.
The failure of the loss-making BT Global Services, which made wildly over-optimistic projections about future profits, has forced BT into a cash squeeze as it must also pump an annual £525m into its huge pension scheme over the next three years to plug a widening funding gap caused by the recession.
As part of a plan to cut operating costs and capital expenditure by more than £1bn, BT will axe 15,000 jobs this year – about 10% of its workforce – on top of 15,000 who left the firm last year, 5,000 of whom went in the first three months of this year alone.
Its 1.1 million shareholders, meanwhile, many of whom rely on the company's dividends to augment their pensions, will see their income plunge as the company plans a final dividend of just 1.1p a share, making its payout 6.5p this year compared with 15.8p last year. The dividend cut will save BT more than £700m.
"It has been a really difficult year and yes I apologise to shareholders," said Livingston, who took over from Ben Verwaayen less than a year ago. "It has been a difficult year but ... I think the question is are the management team today doing the right thing to deliver for shareholders in the future and that's my real duty."
Sir Michael Rake, the chairman, added: "We are all extremely unhappy; it is very disappointing, given the performance of the other three divisions, that we have had these issues in Global Services but the best thing that we can do for all our shareholders is fix it quickly and grow the dividend again from a sustainable base."
Union leaders, however, reacted angrily to the news that jobs would be cut because of the failure of BT Global Services. The company has already frozen pay for all staff. Andy Kerr, deputy general secretary of the Communication Workers Union, said: "Global Services has been a disaster and the staff in BT are having to pay the price for their mismanagement."
BT employs 147,000 people – 42,000 of whom are contractors who have already seen their pay drop by an average of 14% as the company squeezes costs. Last year BT made 10,000 contractors and 5,000 staff redundant and the firm is looking for a similar reduction this year. Livingston stressed, however, that he hoped staff jobs would go through voluntary redundancy and people taking early retirement. "We will do our best to avoid compulsory redundancies," he said.
Both Rake and Livingston said there had been no discussion, either internally or with investors, about a possible rights issue and the company would be able to generate more than £1bn in cash this year, enough to meet further dividend payments, investment and reduce the company's £10.4bn debts.
"We are absolutely confident that we will have a sustainable dividend," Livingston added. "We can do a number of things: we can invest for the future of the business, we can pay down debt, we can support the pension scheme and do that with a dividend.
"Shareholders, of which I am one, would like to see a higher dividend, obviously," he added.
"But we have seen a massive change in the market, we are certainly not the only company that has reduced its dividend ... but as a result of the change in the market, the amount that we have to put into the pension has gone up and that money has come out of the dividend."
BT dramatically warned on profits in October as it emerged that BT Global Services had overestimated the potential profitability of many of its biggest contracts, including its part in the upgrade of the NHS IT systems. Since then, 85% of the unit's senior managers have gone, including its chief executive, François Barrault, who was replaced by the group finance director, Hanif Lalani.
Lalani and the new group finance director, Tony Chanmugam, have been poring over the group's books and slashing the value of the business. Having already written down £340m from the value of BT Global Services late last year, BT has taken a further £1.3bn hit for the three months to the end of March. Resuscitating the business, meanwhile, has already cost £280m and will cost a further £420m over the next two years.
Questions have been raised about whether Livingston should have spotted the problems in Global Services when he was group finance director four years ago – before he switched to heading the company's retail business. Chanmugam, however, said the problems in the business centred around the terms and conditions that were attached to its contracts and how those contracts were actually run.
"I can be quite blunt with Ian," he said, "and he knows I am blunt and very straight in terms of what I say. These issues were not issues in relation to when Ian was chief financial officer. If they were, I would have told him that. They are not. These issues have come about as a result of poor management practices and changes in the economic environment that have taken place over the past few years."
As a result of Global Services' problems, BT made a £1.28bn loss for the last three months of its financial year compared with a £494m profit last year. Overall, the company made an annual loss of £134m compared with a profit last year of £1.97bn. Total annual revenue was up 1% at £5.47bn in the last quarter of the year, leaving full-year revenues at £21.4bn, up 3%. The company warned, however, that it expects revenue to decline by 4% to 5% this year at least in part because of the problems at Global Services.
BT Global Services made an operating loss of £2bn in the year to March on revenues of £8.8bn. The rest of the business, however, weathered the recession far better, recording its best performance for five years.
One of the few genuine bright spots in the results was a pledge by BT to speed up the roll-out of its next-generation super-fast broadband network. Under a plan announced last summer, BT plans to plug 10m homes into a new fibre-optic network over the next few years. Originally, it had expected to connect 500,000 homes this year and that figure will now be doubled to more than a million.
Thursday, May 14, 2009
Barack Obama's US climate bill seen as a step forward
The first concrete steps by Congress to fulfil Barack Obama's promise to green America's economy were seen around the world today as a significant step forward, though they remain far short of what scientists say is needed to solve global warming.
Democratic leaders in Congress said yesterdaytoday they had defied conventional wisdom that they would be unable to persuade representatives from oil and coal, rust belt and southern states to support a bill. The slightly weakened draft now calls for a 17% cut in greenhouse gas emissions from 2005 levels by 2020. "It's a legislative Susan Boyle. Everyone underestimated it until it started to sing," said Ed Markey, who chairs the subcommittee on climate change.
Democrats hope to finish the draft in a week. Their initial compromise fell short of what some environmentalists in the US and in the international community hoped for. They said it failed to send a strong enough signal of the US commitment to action and would undermine efforts to reach a deal on emission cuts at the UN climate treaty talks at Copenhagen later this year.
But diplomats and environmental policy experts said todaytoday that the bill marked a hard-won victory for Henry Waxman, the California Democrat steering the legislation, in the face of strong opposition from oil, coal and rustbelt Democrats. "I think he has his own fight right now. I don't think we need to get involved as well," said one European official.
Elliot Diringer, of the Pew Centre on Global Climate Change, said the international community would be pragmatic. "I think there is growing recognition internationally that this would [be] very ambitious for the United States," he said.
Diplomats have told America's climate change negotiators that they must see a serious move to cut US carbon emissions if the world is to agree a global deal. The US is the biggest per capita emitter.
The bill taking shape shows a lowered cut for 2020, although it would keep the US ambition to cut carbon emissions by 80% by 2050. It also departs from the original intent of auctioning off pollution permits.
In the current version of the bill, 35% of pollution allowances are to be given for free to power companies. and 15% to cement, steel and other energy-intensive industries. Car makers are to get 3%.
The bill should, nevertheless, still be enough to persuade China, the world's biggest polluter, to come on board at Copenhagen, said William Chandler, of the Carnegie Endowment for International Peace. "I think it's close enough to the original," he said.
The PR offensive by the oil and gas industry against Obama's green agenda, revealed this week in the Guardian, is likely to intensify next week as Congress begins the formal drafting process.
Democratic leaders in Congress said yesterdaytoday they had defied conventional wisdom that they would be unable to persuade representatives from oil and coal, rust belt and southern states to support a bill. The slightly weakened draft now calls for a 17% cut in greenhouse gas emissions from 2005 levels by 2020. "It's a legislative Susan Boyle. Everyone underestimated it until it started to sing," said Ed Markey, who chairs the subcommittee on climate change.
Democrats hope to finish the draft in a week. Their initial compromise fell short of what some environmentalists in the US and in the international community hoped for. They said it failed to send a strong enough signal of the US commitment to action and would undermine efforts to reach a deal on emission cuts at the UN climate treaty talks at Copenhagen later this year.
But diplomats and environmental policy experts said todaytoday that the bill marked a hard-won victory for Henry Waxman, the California Democrat steering the legislation, in the face of strong opposition from oil, coal and rustbelt Democrats. "I think he has his own fight right now. I don't think we need to get involved as well," said one European official.
Elliot Diringer, of the Pew Centre on Global Climate Change, said the international community would be pragmatic. "I think there is growing recognition internationally that this would [be] very ambitious for the United States," he said.
Diplomats have told America's climate change negotiators that they must see a serious move to cut US carbon emissions if the world is to agree a global deal. The US is the biggest per capita emitter.
The bill taking shape shows a lowered cut for 2020, although it would keep the US ambition to cut carbon emissions by 80% by 2050. It also departs from the original intent of auctioning off pollution permits.
In the current version of the bill, 35% of pollution allowances are to be given for free to power companies. and 15% to cement, steel and other energy-intensive industries. Car makers are to get 3%.
The bill should, nevertheless, still be enough to persuade China, the world's biggest polluter, to come on board at Copenhagen, said William Chandler, of the Carnegie Endowment for International Peace. "I think it's close enough to the original," he said.
The PR offensive by the oil and gas industry against Obama's green agenda, revealed this week in the Guardian, is likely to intensify next week as Congress begins the formal drafting process.
Heads roll as Westminster reels from MPs' expenses row
Gordon Brown and David Cameron were tonight battling to salvage the reputation of parliament after the MPs' expenses scandal claimed the first scalps from both major parties, amid signs that the crisis is in danger of spiralling out of control.
Despondent MPs tonight voiced fears that Britain may experience a milder version of the "clean hands" affair that brought down Italy's postwar political settlement in the 1990s. There were growing popular demands for MPs to be prosecuted as common benefit cheats.
Both houses of parliament, and the two main parties, were mired in the expenses and earnings scandal today when:
• Elliot Morley, a Labour former environment minister, was suspended from the parliamentary Labour party after he admitted claiming £16,800 in mortgage payments on his constituency home 20 months after repaying the loan. Morley referred himself to John Lyon, the parliamentary standards commissioner.
• Justice minister Shahid Malik was revealed to have claimed thousands of pounds in taxpayer allowances on his second home while renting his main home. Malik had run up the highest expenses claim of any MP, claiming second home allowances – £66,827 over three years – on his house in London. He rented his main home in his Dewsbury constituency at a discounted rate of less than £100 a week.
• The veteran Conservative MP Andrew MacKay resigned as senior parliamentary adviser to Cameron after jointly claiming £170,000 over four years on properties with his wife, fellow Tory MP Julie Kirkbride. Cameron described his behaviour as completely unacceptable after it was revealed that MacKay designated Kirkbride's constituency flat in Bromsgrove, Worcestershire, as his main residence, allowing him to claim the annual £24,006 additional costs allowance on their joint London home. Kirkbride designated this property as her main residence, allowing her to make claims on her constituency flat.
• Two Labour peers were facing suspension from the House of Lords – the first since 1642 – after a report found them guilty of offering to amend legislation in exchange for payments. The Lords privileges committee found that Lord Truscott and Lord Taylor of Blackburn had "failed to act on their personal honour" after they offered their services to undercover reporters from the Sunday Times posing as lobbyists who wanted to amend government legislation.
• Michael Martin, the Commons Speaker, was on course to become a high-profile casualty, amid growing anger at his response. Nick Clegg, the Lib Dem leader, is expected next week to become the first party leader to call for Martin to resign after his frontbenchers said he no longer commands their confidence.
Senior ministers tonight voiced the fear that the crisis shows no signs of abating. "It gets worse every day," one cabinet minister said. The housing minister, Margaret Beckett, was heckled on the BBC's Question Time programme when the expenses issue was raised.
And a YouGov poll for the Sun tonight showed the effect of the crisis on the major parties. When asked about voting intentions in the European elections, the Conservatives were on 28% (down from 37% last week) and Labour down to 19%, the same as the UK Independence party. There was no sign of any surge in support for the BNP.
The prime minister attempted to regain the initiative when he announced that Morley had been suspended from the parliamentary Labour party and had been sacked as his climate change envoy. Speaking at the launch of Labour's European and local election campaign in Derbyshire, Brown said: "Where disciplinary action is necessary it will, and will immediately, be taken." He said that he hoped to restore trust in politics.
Amid cabinet worries that Brown has struggled to command the political landscape this week – as Cameron drew up tough procedures to deal with "wrong" expenses by Tories – the Labour leadership drew up its own plan of action.
Nick Brown, the chief whip, is to ask Labour's ruling national executive committee to rule next Tuesday on Morley and on Fabian Hamilton, the MP for Leeds North East, whose expenses were questioned in today's Telegraph.
There were further signs tonight of a backlash against MPs of all parties. A senior shadow minister, who has not been named by the Telegraph in its exposé of MPs' expenses, was yesterday asked by county councillors not to campaign for next month's local elections.
The shadow minister said: "The whole political class is in trouble. There are now no rules. We don't know where this is going to end. It has the ring of the 'clean hands' affair in Italy
Despondent MPs tonight voiced fears that Britain may experience a milder version of the "clean hands" affair that brought down Italy's postwar political settlement in the 1990s. There were growing popular demands for MPs to be prosecuted as common benefit cheats.
Both houses of parliament, and the two main parties, were mired in the expenses and earnings scandal today when:
• Elliot Morley, a Labour former environment minister, was suspended from the parliamentary Labour party after he admitted claiming £16,800 in mortgage payments on his constituency home 20 months after repaying the loan. Morley referred himself to John Lyon, the parliamentary standards commissioner.
• Justice minister Shahid Malik was revealed to have claimed thousands of pounds in taxpayer allowances on his second home while renting his main home. Malik had run up the highest expenses claim of any MP, claiming second home allowances – £66,827 over three years – on his house in London. He rented his main home in his Dewsbury constituency at a discounted rate of less than £100 a week.
• The veteran Conservative MP Andrew MacKay resigned as senior parliamentary adviser to Cameron after jointly claiming £170,000 over four years on properties with his wife, fellow Tory MP Julie Kirkbride. Cameron described his behaviour as completely unacceptable after it was revealed that MacKay designated Kirkbride's constituency flat in Bromsgrove, Worcestershire, as his main residence, allowing him to claim the annual £24,006 additional costs allowance on their joint London home. Kirkbride designated this property as her main residence, allowing her to make claims on her constituency flat.
• Two Labour peers were facing suspension from the House of Lords – the first since 1642 – after a report found them guilty of offering to amend legislation in exchange for payments. The Lords privileges committee found that Lord Truscott and Lord Taylor of Blackburn had "failed to act on their personal honour" after they offered their services to undercover reporters from the Sunday Times posing as lobbyists who wanted to amend government legislation.
• Michael Martin, the Commons Speaker, was on course to become a high-profile casualty, amid growing anger at his response. Nick Clegg, the Lib Dem leader, is expected next week to become the first party leader to call for Martin to resign after his frontbenchers said he no longer commands their confidence.
Senior ministers tonight voiced the fear that the crisis shows no signs of abating. "It gets worse every day," one cabinet minister said. The housing minister, Margaret Beckett, was heckled on the BBC's Question Time programme when the expenses issue was raised.
And a YouGov poll for the Sun tonight showed the effect of the crisis on the major parties. When asked about voting intentions in the European elections, the Conservatives were on 28% (down from 37% last week) and Labour down to 19%, the same as the UK Independence party. There was no sign of any surge in support for the BNP.
The prime minister attempted to regain the initiative when he announced that Morley had been suspended from the parliamentary Labour party and had been sacked as his climate change envoy. Speaking at the launch of Labour's European and local election campaign in Derbyshire, Brown said: "Where disciplinary action is necessary it will, and will immediately, be taken." He said that he hoped to restore trust in politics.
Amid cabinet worries that Brown has struggled to command the political landscape this week – as Cameron drew up tough procedures to deal with "wrong" expenses by Tories – the Labour leadership drew up its own plan of action.
Nick Brown, the chief whip, is to ask Labour's ruling national executive committee to rule next Tuesday on Morley and on Fabian Hamilton, the MP for Leeds North East, whose expenses were questioned in today's Telegraph.
There were further signs tonight of a backlash against MPs of all parties. A senior shadow minister, who has not been named by the Telegraph in its exposé of MPs' expenses, was yesterday asked by county councillors not to campaign for next month's local elections.
The shadow minister said: "The whole political class is in trouble. There are now no rules. We don't know where this is going to end. It has the ring of the 'clean hands' affair in Italy
Spanish economy shrinks rapidly
Spain's economy suffered its largest contraction in 50 years in the first three months of 2009, preliminary estimates have shown.
GDP fell 1.8% from the previous quarter and was down 2.9% year-on-year, the National Statistics Institute said. It will release final data next week.
Economists said the falls were the steepest seen since 1959.
Spain had enjoyed 14 years of consecutive growth before entering recession in the last quarter of 2008.
The near-collapse of its key construction industry has hit the economy hard.
The Spanish government has predicted GDP will shrink by 1.6% in 2009, while the European Commission has said it expects Spain to be the last European Union country to exit recession, probably in 2011.
"Although Q1 could mark the trough in the recession, any improvement in Q2 and beyond may be fairly modest," Ben May, European economist at Capital Economics said.
"Indeed, Spain's economic imbalances will ensure that it experiences one of the most prolonged downturns in the eurozone."
GDP fell 1.8% from the previous quarter and was down 2.9% year-on-year, the National Statistics Institute said. It will release final data next week.
Economists said the falls were the steepest seen since 1959.
Spain had enjoyed 14 years of consecutive growth before entering recession in the last quarter of 2008.
The near-collapse of its key construction industry has hit the economy hard.
The Spanish government has predicted GDP will shrink by 1.6% in 2009, while the European Commission has said it expects Spain to be the last European Union country to exit recession, probably in 2011.
"Although Q1 could mark the trough in the recession, any improvement in Q2 and beyond may be fairly modest," Ben May, European economist at Capital Economics said.
"Indeed, Spain's economic imbalances will ensure that it experiences one of the most prolonged downturns in the eurozone."
Sony makes first loss in 14 years
Electronics giant Sony has reported its first annual loss in 14 years, after being hit by a big drop in sales.
Sony reported a loss of 98.9bn yen ($1.04bn; £685m) for the year to the end of March, compared with a profit of 369.4bn yen the previous year.
The company blamed the global downturn and the strong yen for the loss. Worldwide sales were down 12.9%.
It had previously announced it would be cutting 8,000 of its 185,000 workforce and closing 10% of its factories.
However, the loss was not as bad as Sony had expected. It had forecast a loss of 150bn yen back in January.
Sony's shares closed down 6.8% at 2,400 yen ahead of the results
Several Japanese companies have said they have been hurt by the strong yen, which make exports more expensive.
On Tuesday, Hitachi announced an annual loss of 787.3bn yen - a record for a Japanese manufacturer.
'Gradual recovery'
Sony, which makes PlayStation games consoles and Vaio PCs, forecast a net loss for the current financial year of 120bn yen.
And it said it would carry on with its restructuring programme of closing plants and cutting jobs.
Analysts greeted Sony's results with cautious optimism.
"Their outlook gave me the impression that their business is heading for a gradual recovery," said Fujio Ando, senior managing director at Chibagin Asset Management.
"But it would all depend on whether they would be able to start producing popular products, because right now they have no 'Number One' products."
Nintendo rivalry
Sales of the PS3 console rose from nine million units to 10 million
Sony has had to battle with the popularity of rival Nintendo's Wii console.
Sales in Sony's gaming division were down 18%, largely thanks to the falling popularity of its older PlayStation 2.
Sales of the PS2 console fell from 13.66m units the previous year to 7.91m, while sales of software for the PS2 decreased from 154m units to 83.5m.
The decline in PS2 sales outweighed a rise in sales of the newer and more powerful PS3.
In March, the PS3 outsold the Nintendo Wii in Japan for the first time in 16 months. However experts saw this as a temporary blip rather than a sign of the Wii's decline.
Earlier this month Nintendo said it made an annual profit of 279.1bn yen.
Management shake-up
Sony's president Ryoji Chubachi stepped down in April as part of a managerial reshuffle at the group.
Mr Chubachi had overseen Sony's electronics sector which is at the heart of the firm's woes.
Chairman and chief executive Howard Stringer took on the role of president.
Since then, Sony's shares have gained 43%.
Nobuo Kurahashi, an analyst at Mizuho Investors Securities called the move "a positive sign of how Sony is frantically moving forward toward change".
Mr Stringer, who was born in Wales but is a US citizen, is the first non-Japanese boss of Sony.
He has also promoted three relatively young executives to his managerial team under the reorganisation
Sony reported a loss of 98.9bn yen ($1.04bn; £685m) for the year to the end of March, compared with a profit of 369.4bn yen the previous year.
The company blamed the global downturn and the strong yen for the loss. Worldwide sales were down 12.9%.
It had previously announced it would be cutting 8,000 of its 185,000 workforce and closing 10% of its factories.
However, the loss was not as bad as Sony had expected. It had forecast a loss of 150bn yen back in January.
Sony's shares closed down 6.8% at 2,400 yen ahead of the results
Several Japanese companies have said they have been hurt by the strong yen, which make exports more expensive.
On Tuesday, Hitachi announced an annual loss of 787.3bn yen - a record for a Japanese manufacturer.
'Gradual recovery'
Sony, which makes PlayStation games consoles and Vaio PCs, forecast a net loss for the current financial year of 120bn yen.
And it said it would carry on with its restructuring programme of closing plants and cutting jobs.
Analysts greeted Sony's results with cautious optimism.
"Their outlook gave me the impression that their business is heading for a gradual recovery," said Fujio Ando, senior managing director at Chibagin Asset Management.
"But it would all depend on whether they would be able to start producing popular products, because right now they have no 'Number One' products."
Nintendo rivalry
Sales of the PS3 console rose from nine million units to 10 million
Sony has had to battle with the popularity of rival Nintendo's Wii console.
Sales in Sony's gaming division were down 18%, largely thanks to the falling popularity of its older PlayStation 2.
Sales of the PS2 console fell from 13.66m units the previous year to 7.91m, while sales of software for the PS2 decreased from 154m units to 83.5m.
The decline in PS2 sales outweighed a rise in sales of the newer and more powerful PS3.
In March, the PS3 outsold the Nintendo Wii in Japan for the first time in 16 months. However experts saw this as a temporary blip rather than a sign of the Wii's decline.
Earlier this month Nintendo said it made an annual profit of 279.1bn yen.
Management shake-up
Sony's president Ryoji Chubachi stepped down in April as part of a managerial reshuffle at the group.
Mr Chubachi had overseen Sony's electronics sector which is at the heart of the firm's woes.
Chairman and chief executive Howard Stringer took on the role of president.
Since then, Sony's shares have gained 43%.
Nobuo Kurahashi, an analyst at Mizuho Investors Securities called the move "a positive sign of how Sony is frantically moving forward toward change".
Mr Stringer, who was born in Wales but is a US citizen, is the first non-Japanese boss of Sony.
He has also promoted three relatively young executives to his managerial team under the reorganisation
Astronauts make Hubble repairs
Two shuttle astronauts have completed the first of five spacewalks to repair and upgrade the Hubble Space Telescope.
John Grunsfeld and Drew Feustel spent almost seven hours working on the observatory, and achieved all of their primary objectives.
Chief among these was the installation of a new instrument, the Wide Field Camera 3, which will allow Hubble to see deeper into space than ever before.
They also exchanged a data processing computer that failed last year.
The break-down had left Hubble with no back-up for the unit it currently uses to route all its wonderful images to Earth.
The replacement passed its initial connection tests with flying colours, ensuring Hubble now has full redundancy for its data processing tasks.
Other work included fixing a mechanism that will enable a robotic spacecraft to capture Hubble at some future date. This should ensure there is a safe means to de-orbit the observatory at the end of its life.
Thursday's spacewalk was not without incident. Before the astronauts could install the Wide Field Camera 3, they had to remove the existing Wide Field Planetary Camera 2. This took some time when a bolt refused to come loose as expected.
The spacewalkers tried a number of different tools; but when they failed to move the bolt also, mission control authorised the astronauts to use as much force as possible.
It was an anxious moment, because had the bolt broken the old camera would have been stuck in place and the new instrument would have had to return to Earth.
"OK, here we go," Feustel said as he forced the bolt. "I think I've got it. It turned. It definitely turned." And then he said: "Woo-hoo, it's moving out!"
Space shuttle Atlantis met up with Hubble on Wednesday while both were circling the Earth some 560km (350 miles) above the ground.
Atlantis' robotic arm was used to grab hold of Hubble. The telescope was pulled down on to a bench that can turn and tilt to give the spacewalking astronauts easy access to its system bays.
The shuttle launched from Florida's Kennedy Space Center on Monday. It is due to return to Earth on Friday of next week.
John Grunsfeld and Drew Feustel spent almost seven hours working on the observatory, and achieved all of their primary objectives.
Chief among these was the installation of a new instrument, the Wide Field Camera 3, which will allow Hubble to see deeper into space than ever before.
They also exchanged a data processing computer that failed last year.
The break-down had left Hubble with no back-up for the unit it currently uses to route all its wonderful images to Earth.
The replacement passed its initial connection tests with flying colours, ensuring Hubble now has full redundancy for its data processing tasks.
Other work included fixing a mechanism that will enable a robotic spacecraft to capture Hubble at some future date. This should ensure there is a safe means to de-orbit the observatory at the end of its life.
Thursday's spacewalk was not without incident. Before the astronauts could install the Wide Field Camera 3, they had to remove the existing Wide Field Planetary Camera 2. This took some time when a bolt refused to come loose as expected.
The spacewalkers tried a number of different tools; but when they failed to move the bolt also, mission control authorised the astronauts to use as much force as possible.
It was an anxious moment, because had the bolt broken the old camera would have been stuck in place and the new instrument would have had to return to Earth.
"OK, here we go," Feustel said as he forced the bolt. "I think I've got it. It turned. It definitely turned." And then he said: "Woo-hoo, it's moving out!"
Space shuttle Atlantis met up with Hubble on Wednesday while both were circling the Earth some 560km (350 miles) above the ground.
Atlantis' robotic arm was used to grab hold of Hubble. The telescope was pulled down on to a bench that can turn and tilt to give the spacewalking astronauts easy access to its system bays.
The shuttle launched from Florida's Kennedy Space Center on Monday. It is due to return to Earth on Friday of next week.
Fears of Sri Lanka 'catastrophe'
The Red Cross says its staff in Sri Lanka are witnessing an "unimaginable humanitarian catastrophe" in the area where troops have trapped Tamil Tigers.
The agency says a ferry loaded with aid has been unable to reach the battered north-eastern coastal strip for three days because of fighting.
There are also reports that staff have quit the last hospital in the war zone.
A senior UN envoy is on his way to Sri Lanka to try "to help resolve the humanitarian situation", the UN says.
Vijay Nambiar, Secretary General Ban Ki-moon's chief of staff, is expected to arrive on Friday.
Last month Mr Nambiar met Sri Lankan President Mahinda Rajapaksa but failed to secure access to the war zone for humanitarian teams.
See a map of the conflict region
The UN says about 50,000 civilians are trapped in the war zone, although Colombo disputes this figure.
The government has rejected international calls to stop its offensive against the Tamil Tiger rebels, saying it would give them time to recover. Now that it has trapped the Tamil Tigers, it hopes to soon end the 25-year-old civil war.
The International Committee of the Red Cross (ICRC) said its chartered ferry, the Green Ocean, had been unable to deliver aid or evacuate the wounded for three days.
"Our staff are witnessing an unimaginable humanitarian catastrophe," said ICRC director of operations Pierre Krahenbuhl, based in Geneva.
"Despite high-level assurances, the lack of security on the ground means that our sea operations continue to be stalled, and this is unacceptable," he said.
"People are left to their own devices."
The ICRC says it requires security and unimpeded access to the area immediately.
In a statement, it said another aid ship, from the World Food Programme, was also waiting to deliver supplies to the war zone.
Hospital abandoned
The BBC's Charles Haviland in Sri Lanka says there are also unverified reports that medical staff have abandoned the main hospital in the rebel-held area because of persistent shelling.
One report said that about 400 badly wounded patients had been left behind, along with more than 100 bodies awaiting burial.
Dozens of civilians have been reported killed in artillery attacks on the facility in recent days.
Earlier on Thursday, a military spokesman told the BBC that unmanned aircraft had filmed more than 2,000 people wading across the lagoon which borders the fighting zone on the non-seaward side.
Brig Udaya Nanayakkara said the civilians had braved rebel fire to reach government-held areas.
"There is a large number of people crossing, and the (rebels) fired at them. Four people were killed, 14 were wounded," he said.
The Sri Lankan army's version of events cannot be independently verified and there has been no comment from the rebels.
The authorities and the rebels blame each other for civilian deaths.
'Shock'
As the fighting continued, Britain said on Thursday that it supported an early inquiry into whether war crimes have been committed in Sri Lanka.
"We would support an early investigation into all incidents that may have resulted in civilian casualties," said junior foreign minister Bill Rammell.
He said the UN's estimate of more than 6,500 civilian deaths since January was - if accurate - "truly shocking and appalling".
The UK-based charity Save the Children said on Thursday that a growing number of children were becoming separated from their families as they fled the war zone and entered government-controlled camps.
"The camps are chaotic," said spokesman Branko Golubovic.
"These children are coming out of combat areas where they have been severely traumatised only to find themselves in yet another harsh environment in the camps."
Nearly 200,000 civilians are believed to be living in the government's overcrowded displacement camps.
The agency says a ferry loaded with aid has been unable to reach the battered north-eastern coastal strip for three days because of fighting.
There are also reports that staff have quit the last hospital in the war zone.
A senior UN envoy is on his way to Sri Lanka to try "to help resolve the humanitarian situation", the UN says.
Vijay Nambiar, Secretary General Ban Ki-moon's chief of staff, is expected to arrive on Friday.
Last month Mr Nambiar met Sri Lankan President Mahinda Rajapaksa but failed to secure access to the war zone for humanitarian teams.
See a map of the conflict region
The UN says about 50,000 civilians are trapped in the war zone, although Colombo disputes this figure.
The government has rejected international calls to stop its offensive against the Tamil Tiger rebels, saying it would give them time to recover. Now that it has trapped the Tamil Tigers, it hopes to soon end the 25-year-old civil war.
The International Committee of the Red Cross (ICRC) said its chartered ferry, the Green Ocean, had been unable to deliver aid or evacuate the wounded for three days.
"Our staff are witnessing an unimaginable humanitarian catastrophe," said ICRC director of operations Pierre Krahenbuhl, based in Geneva.
"Despite high-level assurances, the lack of security on the ground means that our sea operations continue to be stalled, and this is unacceptable," he said.
"People are left to their own devices."
The ICRC says it requires security and unimpeded access to the area immediately.
In a statement, it said another aid ship, from the World Food Programme, was also waiting to deliver supplies to the war zone.
Hospital abandoned
The BBC's Charles Haviland in Sri Lanka says there are also unverified reports that medical staff have abandoned the main hospital in the rebel-held area because of persistent shelling.
One report said that about 400 badly wounded patients had been left behind, along with more than 100 bodies awaiting burial.
Dozens of civilians have been reported killed in artillery attacks on the facility in recent days.
Earlier on Thursday, a military spokesman told the BBC that unmanned aircraft had filmed more than 2,000 people wading across the lagoon which borders the fighting zone on the non-seaward side.
Brig Udaya Nanayakkara said the civilians had braved rebel fire to reach government-held areas.
"There is a large number of people crossing, and the (rebels) fired at them. Four people were killed, 14 were wounded," he said.
The Sri Lankan army's version of events cannot be independently verified and there has been no comment from the rebels.
The authorities and the rebels blame each other for civilian deaths.
'Shock'
As the fighting continued, Britain said on Thursday that it supported an early inquiry into whether war crimes have been committed in Sri Lanka.
"We would support an early investigation into all incidents that may have resulted in civilian casualties," said junior foreign minister Bill Rammell.
He said the UN's estimate of more than 6,500 civilian deaths since January was - if accurate - "truly shocking and appalling".
The UK-based charity Save the Children said on Thursday that a growing number of children were becoming separated from their families as they fled the war zone and entered government-controlled camps.
"The camps are chaotic," said spokesman Branko Golubovic.
"These children are coming out of combat areas where they have been severely traumatised only to find themselves in yet another harsh environment in the camps."
Nearly 200,000 civilians are believed to be living in the government's overcrowded displacement camps.
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