'New Wave' Keeps BT on Track

Networked IT and broadband services are driving growth, but the cost of restructuring plans has dented BT's share price

May 17, 2007

3 Min Read
'New Wave' Keeps BT on Track

BT Group plc (NYSE: BT; London: BTA) reported better revenue and profit numbers for its fourth quarter and full financial year today, and announced a new £2.5 billion (US$4.94 billion) share buyback scheme to return cash to its investors. (See BT Reports Q4.)

Revenues of £5.3 billion ($10.5 billion) and £20.2 billion ($39.9 billion) for the quarter and fiscal year ended March 31 were up 3 percent and 4 percent, respectively, while net income was £455 million ($900 billion) for the quarter and £2.85 billion ($5.64 billion) for the year, up 16 percent and 82 percent compared with a year earlier.

The carrier highlighted the importance of its "New Wave" services -- networked IT services for corporate customers, broadband, and mobility -- which accounted for £2.1 billion ($4.15 billion) in sales, about 40 percent of fourth-quarter revenues.

BT also announced a new managed services deal with the U.K. Post Office worth a whopping £750 million ($1.48 billion). The carrier now claims to be Britain's leading broadband service provider with 3.66 million retail high-speed access customers, about 26 percent of the total broadband market (including cable). (See BT Wins Post Office Deal and BT Claims Broadband Leadership.)

BT noted that it now has 1.4 million VOIP subscribers and has installed more than 1 million home gateways in the homes of its broadband customers. That's a statistic worth noting as the firm kicks off its aggressive IPTV marketing campaign. (See BT Pushes IPTV.)

All positive news, especially as BT believes it will continue to increase its revenues by 2 to 5 percent in the current financial year, which began April 1.

But for investors, the edge was taken off those numbers by the revelation that BT's restructuring process, announced a few weeks ago, will cost a whopping £450 million ($889 million), with those charges taken during the current financial year. (See BT Revamps, Creates New Units .)

That news sent the carrier's share price down 6 pence, nearly 2 percent, to 309.25 pence ($6.10) on the London Stock Exchange .

BT's CEO, Ben Verwaayen, told analysts at today's earnings presentation that the restructuring process was part of the next phase of BT's evolution into a new type of carrier. "We're going to be a service provider with global reach, and we're going to be the leading one," he proclaimed, sending out an open challenge to BT's main international rivals, AT&T Inc. (NYSE: T), Orange (NYSE: FTE), and Verizon Enterprise Solutions .

Verwaayen has spoken time and time again about how the 21CN next-generation network rollout is not just a U.K. phenomenon, but a new global infrastructure, one that's going to create a platform upon which services can be delivered quickly, effectively, and to anywhere in the world. (See BT Aims to Finish 21CN in Late 2011, BT Plans Further Global Push, and BT Deploys Ericsson VOIP Gear.)

"We have to create a capability that is truly open… a service neutral infrastructure, that's the 21CN. And we know how to make money out of it, more money than we are making today," added Verwaayen.

— Ray Le Maistre, International News Editor, Light Reading

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