BT Looks to Home Comforts Amid Italian Crisis

Consumer lift
The bright spot for BT remains the various consumer-facing businesses, which continued to attract new customers and grow sales.

Earlier in the week, BT flagged revenue growth at EE for the "first time," and today it revealed that sales rose 2%, to around £1.3 billion ($1.6 billion), thanks to the success of the "more for more" strategy, which has partly entailed the inclusion of new content offerings in mobile service plans. (See EE to Report Sales Growth for 'First Time'.)

Patterson even suggested that revenue growth in this area could help BT to secure content rights in future. "It is a developing area and its strengthens our ability to bid but I will not go into details of what that looks like," he said.

In a challenge to pay-TV giant Sky , BT has previously spent lavish sums on rights to screen top-flight soccer matches, but the strategy has prompted some concern about the cost burden. BT's broadband rivals have also complained that BT can use profits generated by its Openreach division, which maintains the country's only nationwide wholesale network, to fund its content moves. (See BT, Sky Splash £5.1B on Premier League Rights.)

Third-quarter sales at BT's mainstream consumer business were up 4%, to about £1.3 billion ($1.6 billion), due to ongoing progress in the broadband and TV markets, but operating profits shrank 7%, to just £208 million ($261 million), because of investments in new sports rights and contact centers.

Despite growth in connections, Openreach reported a 1% year-on-year dip in revenues, to roughly £1.3 billion ($1.6 billion), due to adverse regulation. The unit's operating profit fell 8%, to £327 million ($410 million), because of capital investments.

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Indeed, a huge chunk of BT's capital expenditure continues to go on the Openreach-led deployment of higher-speed network services. The takeover of EE was largely responsible for a 47% increase in third-quarter capex, to £852 million ($1,068 million), compared with the year-earlier quarter. But Openreach accounted for as much as £409 million ($513 million) of this -- spending £88 million ($110 million) more than in the year-earlier quarter.

During the earnings call, executives were asked if BT's current financial problems would have any impact on network funding plans, given some recent political pressure on BT to invest in fiber rather than more advanced copper technologies. (See BT's Gigabit Plans & the UK's Digital Abyss.)

Yet Clive Selley, Openreach's CEO, expressed optimism that falling technology costs might allow the operator to raise its fiber rollout targets.

Currently, BT plans to connect about 10 million homes to G.fast, a technology that boosts connection speeds over copper lines, and another 2 million using fiber-to-the-premises technology. It aims to complete those rollouts by 2020.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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