BT hits Q3 turbulence, but Captain Jansen says all under control

Despite severe COVID-19 headwinds, BT CEO says it was all expected and reiterates full-year outlook.

Ken Wieland, contributing editor

February 4, 2021

4 Min Read
BT hits Q3 turbulence, but Captain Jansen says all under control

The prevalence of bracketed numbers in BT Group's financial presentation for Q3 ended December 31, as well as for the nine-month period up until then, tells its own story. The impact of COVID-19 was keenly felt in most areas of BT's business.

Infrastructure arm Openreach seems to have weathered the pandemic storm comparatively well, but it was not enough to absorb red ink elsewhere.

BT Group Chief Executive Philip Jansen nonetheless insisted Q3 results were "in line with our expectations" and we "remain on track to deliver our 2020/21 outlook, despite even greater Covid-19 restrictions than previously forecast."

Figure 1: Ties that bind: Openreach might have come through the pandemic fairly well - but it can't pull up the rest of BT. (Source: BT) Ties that bind: Openreach might have come through the pandemic fairly well – but it can't pull up the rest of BT.
(Source: BT)

BT reiterated its adjusted EBITDA outlook for its 2020/21 fiscal year at between £7.3 billion (US$9.97 billion) and £7.5 billion, ($10.25 billion) while raising the lower end of the normalized full-year cash-flow outlook by £100 million ($136.6 million), giving a new range here of between £1.3 billion ($1.8 billion) to £1.5 billion ($2 billion).

OK, what's the damage?

Primarily due to the impact of COVID-19 on its consumer and enterprise units, along with "ongoing legacy product declines" and divestments of domestic businesses in Spain, Latin

America and France at its Global division, BT revenue for the first nine months of its 2020/21 fiscal year ended March fell 7%, year-on-year, to a shade over £16 billion ($21.9 billion).

Adjusted EBITDA, at £5.6 billion ($7.7 billion), was down 5% over the same period. BT pinned the blame here on revenue squeezes, although this was apparently offset "partially" by H1 sports rights rebates.

Savings from BT's "modernisation program" instigated by Jansen to cut costs, which involves a fair amount of job cuts, was flagged as another plus, as was a 1% uptick in the rolling 12-month order book at the long-troubled Global unit.

Even so, the Group for the nine-month period still had to contend with a sizable 17% reduction in pre-tax profits, to £1.59 billion ($2.17 billion), compared with the same period last year.

Openreach outreach

Thanks mainly to uptake of full fiber by its communications service provider customers, which helped offset declines in legacy copper products, Openreach posted a 2% increase in Q3 revenue, year-on-year, to nearly £1.3 billion ($1.8 billion).

FTTP rollout also picked up speed, achieving an average run rate of 42,000 premises passed per week during the quarter (40,000 weekly rate during Q2). Openreach said it was on track to achieve the 4.5 million passed target by March 2021.

BT's position on longer term targets for full-fiber rollout is somewhat fuzzier, however. Jansen wants the UK government to waive business rates on building fiber cables, which he sees as critical for giving clarity to the investment business case.

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Without the business rate exemptions, which would release £1 billion ($1.4 billion) in funding and allow a further three million premises to be passed with fiber according to BT, Jansen – in an interview with the Financial Times (paywall applies) - thinks the government's goal of reaching 85% of UK homes with full fiber by 2025 is unlikely to be met. "Time is passing," he ominously warned.

Ofcom's Wholesale Fixed Telecoms Market Review (WFTMR), due to be published in April, is key for BT since it will effectively outline how much profit the Group can make on its £12bn ($16.4 billion) full-fiber investment in the UK.

Jansen, in prepared comments accompanying the latest set of financial results, seemed cagey about the outcome.

"As the WFTMR consultation process draws to a close we're focused on ensuring the new regulation will create an environment to allow for fair returns across our industry including the additional significant network investment we are poised to undertake," he said

"The latest proposals from Ofcom are positive for investment in many areas, but there are key points of clarity still needed to unlock the fibre investment the country needs; and we still need to see concrete progress from Government on the things they can do to support the fibre roll out."

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— Ken Wieland, contributing editor, special to Light Reading

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About the Author(s)

Ken Wieland

contributing editor

Ken Wieland has been a telecoms journalist and editor for more than 15 years. That includes an eight-year stint as editor of Telecommunications magazine (international edition), three years as editor of Asian Communications, and nearly two years at Informa Telecoms & Media, specialising in mobile broadband. As a freelance telecoms writer Ken has written various industry reports for The Economist Group.

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