* Scraps dividend until 2021/22 to weather coronavirus
* Move strengthens balance sheet for fibre investment
* Shares fall 4.5% (Adds CEO comments, shares)
By Kate Holton and Paul Sandle
LONDON, May 7 (Reuters) - Britain's biggest telecoms group BT suspended its dividend and said it would spend billions more on faster fibre broadband connections, on the day two of its major competitors announced plans to merge.
The company said the saving from suspending its dividend until 2021/22 would see it through the expected financial crash caused by the coronavirus pandemic, which is leading to lower revenue from sports customers, reduced business activity and more cautious spending from multinational customers.
It will also help fund a 12 billion pound ($15 billion) plan to upgrade its legacy copper network to full fibre. If the conditions are right, BT said it could reach 20 million premises by the mid to late 2020s, 5 million more than it had targeted.
On the day rivals Telefonica and Liberty Global announced plans to merger their British units to build a stronger challenger, BT also set out plans for a new five-year programme to modernise the business.
Chief Executive Philip Jansen said the coronavirus pandemic, which has seen a surge in the use of mobile phones and data, had brought BT's national leadership in telecoms into the sharpest focus in its history, and while upgrading the network had been important before, it was now "a matter of extreme urgency".
Therefore, the dividend - one of the biggest on the London stock exchange - had to be pulled.
"This was a tough decision, but although hard on shareholders, a necessary one so that we can allocate capital for value-enhancing investments," he told reporters.
"It will also allow us to manage confidently through the coronavirus crisis."
He said the impact of the pandemic would only become clearer as the economic consequences unfolded over the next 12 months.
"Due to COVID-19, BT is not providing guidance for 2020/21, at this time," he added, referring to the respiratory disease caused by the new coronavirus.
Shares in BT, which were yielding 13.5% based on the 15.4 pence full-year dividend the company had planned to pay, were down 4.5% at 108.5 pence at 0735 GMT.
BT's new efficiency programme will cost 1.3 billion pounds to achieve, but will deliver annualised gross benefits of 2 billion pounds by March 2025 as it switches off many legacy programmes and uses new technologies to improve.
The company, which owns the EE mobile network and Britain's biggest fixed-line network under its Openreach unit, said it expected to resume dividend payments at 7.7 pence per share.
BT's adjusted revenues for 2019/20 fell 3% to 22.8 billion pounds and core earnings dropped 3% to 7.9 billion pounds, both meeting market expectations.
$1 = 0.8068 pounds Reporting by Kate Holton and Paul Sandle; editing by Guy Faulconbridge and Mark Potter