& cplSiteName &

BT Hints at More Widespread FTTP Rollout

Iain Morris
1/30/2017

BT is eyeing a more ambitious rollout of fiber-to-the-premises technology, covering a greater number of households and businesses than the 2 million in its current plan, despite its new financial difficulties. (See BT Looks to Home Comforts Amid Italian Crisis.)

During an earnings call last Friday, the UK operator told analysts that with the improving economics of higher-speed broadband technologies it could start to think about raising its FTTP targets.

Under the existing plan, BT Group plc (NYSE: BT; London: BTA) plans to extend FTTP to about 2 million premises by 2020, up from about a third of a million today. Another 10 million premises are to be upgraded using a technology called G.fast, which boosts connection speeds over last-mile copper loops and is currently being trialed.

This mix could easily change, however, according to senior executives at the company.

"We've spent a lot of time honing techniques for delivering FTTP and the challenge was to hit lower cost points than was previously thought possible," said Clive Selley, the CEO of BT's Openreach infrastructure division. "The more we can do that the more we can consider adjusting the mix of 10 million G.fast and 2 million FTTP [premises]."

Quizzing executives about their FTTP ambitions, analysts pointed out that BT has recently come under some political pressure to spend more on so-called "gigabit-speed" networks.

Politicians are concerned the UK could fall behind other parts of the world in the "digital economy" if it does not replace the ageing copper lines that underpin most broadband services with higher-speed fiber lines. Critics calling for the break-up of BT have also argued that its reluctance to invest in fiber is an unwelcome consequence of its dominant market position.

While BT denies it has under-invested -- pointing to recent studies that show the UK leads other European countries on broadband capability -- it finds itself in an awkward situation.

Concerned about BT's growing power, and eager to placate BT's rivals, UK regulator Ofcom has warned the incumbent that it will mandate a strict form of "legal separation" -- erecting barriers between Openreach and the rest of the BT Group -- unless BT comes up with a satisfactory alternative. It has even threatened BT with so-called "structural separation," making Openreach an entirely different company, unless BT shapes up. (See Only BT's Dismemberment Will Sate Rivals.)

Having promised to upgrade broadband infrastructure if it is not broken apart, BT is desperate to impress regulatory officials and market observers.

But its ability to fund a more widespread FTTP rollout was called into question during the recent earnings call following a profit warning earlier in the week.

After conducting a lengthy investigation into accounting irregularities in Italy, BT said the scandal would cost it more dearly than it had originally expected. It is also anticipating a deterioration in UK public-sector and international corporate markets. (See BT's Patterson Feels Italian Heat, Eurobites: BT's Italian Bother Claims Sciolla's Scalp and Dodgy Italian Job Savages BT Earnings, Share Price Tanks.)

As a result, it is now guiding for zero revenue growth this fiscal year (which ends in March) and the next one, and it says earnings (before interest, tax, depreciation and amortization) will be £300 million ($375 million) less this year -- at £7.6 billion ($9.5 billion) -- than it was previously expecting.

Because BT has promised to boost dividends for shareholders, it may struggle to keep increasing capital expenditure.

Stripping out any investments by the EE mobile business it acquired last year, BT spent around £2 billion ($2.5 billion) over the first nine months of the current fiscal year, about 6% more than over the same period a year earlier.

Executives, however, appear to be confident that BT can meet its current rollout targets, and even increase the FTTP share of that plan, without changing the outlook on capital expenditure.

"The outlook reflects existing investment plans and includes the NGA [next-generation access] program of G.fast and FTTP that we set out earlier," said Simon Lowth, BT's chief financial officer, during the earnings call. "That is a program that we can flex between different technologies and we are working to deliver it more efficiently and productively."

Last May, BT said that its Openreach and EE divisions would together invest about £2 billion ($2.5 billion) annually over the subsequent three years to account for the G.fast and FTTP plan as well as mobile broadband spending. (See BT to Cover 2M Homes With FTTP in $8.7B Plan.)

The figure of £2 billion ($2.5 billion) is roughly what Openreach and EE spent in 2015, with the two infrastructure units together investing just less than £1.6 billion ($2 billion) in the first nine months of this fiscal year.

Next page: How much is this going to cost?

(1)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Ray@LR
[email protected]
1/30/2017 | 10:01:13 AM
Time to suck it up...
If BT wants to solidy its future as the UK digital platform provider, retain premier sports content rights and appease its shareholders it may just have to suck it up/bite the bullet and sell something -- global services springs to mind, though the price m ay be somewhat depressed currently due to the 'Italian job'... 
Featured Video
Upcoming Live Events
November 5, 2019, London, England
November 7, 2019, London, UK
November 14, 2019, Maritim Hotel, Berlin
December 3-5, 2019, Vienna, Austria
December 3, 2019, New York, New York
March 16-18, 2020, Embassy Suites, Denver, Colorado
May 18-20, 2020, Irving Convention Center, Dallas, TX
All Upcoming Live Events