BT Flags Best-Ever Fiber Broadband Quarter
UK fixed-line incumbent BT has forecast growth in sales and earnings for the current financial year after reporting a small decrease in revenues during the previous 12-month period.
The forecast came as the operator heralded its best-ever quarter at its fiber broadband business, adding 266,000 retail customers in the January-to-March period, and after shareholders had last week approved BT Group plc (NYSE: BT; London: BTA)'s £12.5 billion ($19 billion) takeover of mobile market leader EE . (See BT Locks Down £12.5B EE Takeover Deal.)
Yet to be cleared by regulatory authorities, that deal would create a powerhouse in the UK's communications sector, able to sell an array of fixed, mobile and TV products to end customers.
In a results statement published earlier today, the operator revealed that sales fell by 2% during the year to March 2015, to £17.85 billion (US$27.17 billion), while adjusted profit before tax rose by 12%, to £3.17 billion ($4.82 billion).
BT attributed the bottom-line improvements to a fall in depreciation and financing costs resulting from capital expenditure efficiencies and debt reduction.
Net debt stood at £5.12 billion ($7.79 billion) in March this year -- £1.91 billion ($2.91 billion) less than a year earlier and just 0.82 times BT's full-year EBITDA, which rose by 3%, to £6.27 billion ($9.54 billion).
The operator's expectation that EBITDA will grow at a "modest" rate this year may help to quell concern about recent heavy spending on rights to screen UK and European soccer matches.
In May, BT forked out £960 million ($1.46 billion) for rights to show a number of English Premier League matches between 2016 and 2019, paying 18% more per game than under its current arrangement. (See BT, Sky Splash £5.1B on Premier League Rights.)
The operator's consumer division is determined to challenge Sky 's dominance of the pay-TV sector and has also been making inroads into the mobile market in anticipation of the merger with EE.
Drawing on a wholesale deal with EE, BT launched its own 4G service in March and claimed to have signed up 50,000 customers during the past six weeks. (See BT Threatens Price War With New 4G Offer.)
That number is about the same that EE managed in the more lucrative postpaid segment over the whole of the January-to-March quarter.
EE also lost 195,000 prepaid customers during the first three months of the year. (See EE Flags Worst Postpaid Growth in 2 Years.)
Buoyed by its broadband gains, BT Consumer reported a 7% increase in full-year revenues, to £4.29 billion ($6.53 billion), but its performance was undermined by an 11% fall in sales at BT Wholesale, to £2.16 billion ($3.29 billion), and a 1% dip in revenues generated by access division Openreach , to £5.01 billion ($7.63 billion).
The operator blamed regulation for setbacks in the wholesale and infrastructure markets and conditions may grow tougher for BT if authorities are eventually persuaded to impose more stringent pricing rules on the incumbent amid a chorus of complaints from its rivals.
TalkTalk , a broadband retailer that uses BT's network, has repeatedly complained the former state-owned monopoly is squeezing its competitors by setting wholesale prices too high or retail prices too low.
Meanwhile, Vodafone UK , the country's third-biggest mobile operator, has argued that BT Openreach should be separated from the rest of the business if BT is allowed to acquire EE.
BT's performance in the broadband market in the January-to-March quarter will only add to those concerns.
The operator claimed that its broadband net additions of 121,000 represented 49% of those in the entire market, leaving slim pickings for a multitude of competitors.
Thanks to growth at the fiber broadband business, 3 million of BT's broadband customers -- or 39% of the total -- were using fiber products in the January-to-March quarter.
Relatively disappointing performances at BT Global Services and, to a lesser extent, BT Business also weighed on Group results for the full year.
Executives largely blamed adverse foreign-exchange movements for a 7% fall in revenues at Global Services, to £6.78 billion ($10.32 billion), while BT Business was hurt by a decline in business call and line volumes caused by the migration to data and VoIP services, reporting a 2% drop in sales, to £3.15 billion ($4.79 billion).
BT's share price was unchanged on the London Stock Exchange during early-afternoon trading.
— Iain Morris, , News Editor, Light Reading