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By | Paul Kunert 30th October 2014 17:32

BT: Consumers and cost cutting save the day

Telco adds 88,000 broadband users, sees £4.38bn in sales

Cost cutting and 88,000 new broadband punters helped BT bank more profits in calendar Q3, although revenues went in the opposite direction as all divisions outside of the consumer wing reported declining fortunes.

The former comms state monopoly turned over £4.38bn of sales in the quarter ended September, down two per cent year-on-year, but operating profit climbed 10 per cent to £778m, as profit before tax went up 13 per cent to £563m.

Operating costs decreased four per cent to £2.93bn with net labour expenses down five per cent due to savings eked out by a group-wide restructuring programme.

Payments to telco operators were down 14 per cent, in line with lower transit volume in BT Wholesale. Property, energy, network operating, IT and other costs were down one per cent. BT Sport programme rights charges were £83m, up from £50m a year ago.

The bulkiest part of BT, the Global Services arm, saw revenues drop five per cent to £1.65bn, which the company attributed in main to the £71m negative impact from forex movements.

However, revenues also declined for GS due to “lower levels of expenditure” in the public sector, and because it walked away from low-margin deals. Total order intake was down 14 per cent to £1.3bn due to a large contract renewal with Unilever in the prior year, BT said.

Operating profit at GS grew 46 per cent to £102m.

BT Business reported a one per cent dip in revenues to £789m but operating profit bounced eight per cent to £213m, aided by a double digit drop in operating costs.

SME and corporate voice revenue went backwards four per cent, with business lines down eight per cent “partly reflecting the migration of customer to VoIP”, BT claimed. SME and corporate data and networking revenues fell two per cent, IT services were up one per cent. Order intake for the quarter declined sequentially by two per cent to £463m.

The Openreach division saw revenues dip two per cent to £1.245bn, with the firm saying “regulatory price changes” had had a negative impact of £45m, partially offset by 38 per cent growth in fibre broadband. Operating costs fell two per cent and operating profit was up two per cent to £292m.

Wholesale takes a tumble

In BT Wholesale, the unit hit the hardest in the quarter, revenues fell 15 per cent year-on-year or some £95m to £529m. Operating costs were slashed 13 per cent but operating profit slumped 28 per cent to £70m.

Much of the decline was attributed to a 28 per cent reduction in the traditional calls, lines and circuits biz, including the impact of lower fixed termination rates after Ofcom’s Narrowband Market Review.

Managed Solutions fell 16 per cent, again hit by the loss of the Post Office contract but IP services jumped 61 per cent.

It was again left to the Consumer arm of BT to fly the growth flag in the three months, as sales came in seven per cent higher than a year ago to £10.5bn. Operating costs were broadly flat and operating profit was up 63 per cent to £171m.

Broadband and TV revenue was up 17 per cent “reflecting the growth in our broadband and BT Sport customer bases".

Fibre was up with 203,000 retail fibre broadband additions, taking the customer base to 2.5m. Some 34 per cent of retail punters are on fibre, BT eastimates.

Consumer line losses were 85,000 in the quarter and BT added 88,000 retail broadband customer, 48 per cent of the DSL and fibre broadband market net additions. In all, 38,000 TV customers signed up in Q3.

“Our share was lower than in recent quarters due to strong promotional activity in the market,” BT said.

Group intra-trade was £885 in the quarter. ®

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