BT to Cover 2M Homes With FTTP in $8.7B Plan
BT will spend around £6 billion ($8.7 billion) over the next three years on extending the coverage of high-speed fixed and mobile networks including fiber-to-the-premises technology (FTTP), the UK telecom incumbent has announced.
Having previously resisted the costlier investments needed to lay fiber all the way to buildings, the operator is now planning to cover about 2 million of the UK's 27 million households with FTTP networks.
As previously announced, BT Group plc (NYSE: BT; London: BTA) also aims to cover about 10 million UK homes with a technology called G.fast, which can boost the performance of last-mile copper connections to as much as 500 Mbit/s, it reckons.
Last month, mobile operator EE , which BT acquired in a £12.5 billion ($18.1 billion) deal earlier this year, unveiled plans to extend geographic 4G coverage from about 60% today to roughly 95% by 2020.
The FTTP scheme suggests BT has bowed to regulatory pressure to make improvements to the country's broadband infrastructure amid complaints from rivals about the operator's growing dominance since its takeover of EE. (See BT Restructures, Boasts Best Quarter in 7 Years.)
Following a strategic review of the sector, national regulatory authority Ofcom stopped short of forcing BT to spin off its Openreach access networks business -- as several critics had demanded -- but it has left the possibility of a future "structural separation" on the table. (See Eurobites: BT Avoids Openreach Split.)
Ofcom also wants BT to make its ducts and poles available under more reasonable terms to rivals that want to build their own fiber networks. Similar regulations in other parts of Europe, such as Spain, appear to have spurred investment in the rollout of high-speed networks.
BT already faces a challenge in the high-speed broadband market from cable rival Virgin Media Inc. (Nasdaq: VMED) -- a subsidiary of Liberty Global Inc. (Nasdaq: LBTY) -- which last week promised to use FTTP technology to cover a million UK homes by 2019.
Under its £3 billion ($4.4 billion) Project Lightning initiative, Virgin plans to extend its overall network coverage from about 13 million premises last year to around 17 million by 2019.
Although Virgin's network is available to fewer homes and businesses than BT's, the cable operator claims an advantage over BT in the speed stakes: Its highest-speed offering in the residential sector is about 200 Mbit/s, while BT's is just 76 Mbit/s.
With FTTP technology, speeds could theoretically improve to as much as 1 Gbit/s.
"Virgin and BT have both pledged to invest and we will now see if others follow our lead," said Gavin Patterson, BT's CEO, in a statement published this morning. "Infrastructure competition is good for the UK and so is the current Openreach model whereby others can piggyback on our investment should they want to."
Despite Ofcom's proposals, there are doubts in the industry that providing easier access to BT's infrastructure would spur a wave of investment in fiber given the financial constraints facing rivals, and especially TalkTalk , the UK's fourth-biggest broadband operator, whose reputation has suffered as the result of a high-profile security breach last year.
Meanwhile, satellite TV company Sky (NYSE, London: SKY), which uses BT's network to operate the UK's second-biggest broadband business, has already hit out at the telecom incumbent's latest plans, reiterating calls for BT to be carved up.
"Despite BT's claims, it is clearer than ever that their plans for FTTP broadband will bypass almost every existing UK home," said the company in a statement. "This limited ambition has been dragged out of BT by the threat of regulatory action, demonstrating once again why an independent Openreach, free to raise its own long-term capital, is the best way for the UK to get the fiber network it needs."
BT recorded a total of £2.65 billion ($3.9 billion) in capital expenditure last year and has not indicated what impact its £6 billion scheme will have on overall capex this year.
Helped by the takeover of EE, BT's revenues in the year to March 2016 rose by 6% on a reported basis, to about £19 billion ($27.5 billion), while profit before tax rose 15%, to around £3 billion ($4.4 billion). BT said that underlying revenues excluding transit rose at a rate of 2% -- the highest in seven years.
In sales terms, the BT Consumer division remained the star of the show, reporting a 7% increase in revenues, to £4.6 billion ($6.7 billion), thanks to healthy demand for broadband and TV services.
Adding 94,000 broadband customers in the recent quarter, BT claimed to have secured 72% of DSL and fiber broadband market net additions, which is likely to add to concern about the operator's growing dominance.
BT's share price was trading up 3.3% in London this morning as this story went to press.
— Iain Morris, , News Editor, Light Reading