The operator said it would use the funds to accelerate fibre-to-the-premises (FTTP) deployment, as well as 5G
Last month, Orange became the first major operator to cut its dividend, reducing by 30% in the wake of coronavirus-related losses.
Now, BT has announced that it will go one step further, scrapping both the last £1 billion dividend of 2019, as well as those of the coming financial year, projected to be worth around £1.5 billion.
“In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP [full-fibre broadband] and 5G, we have taken the difficult decision to suspend the dividend until 2022 and rebase thereafter,” said Philip Jansen, chief executive of BT..
The pandemic itself appears to be the primary factor for the suspension, with BT’s finances taking a hit due to the lack of revenue from sports customers and less activity overall.
“Of course, Covid-19 is affecting our business,” said Jansen. “But the full impact will only become clearer as the economic consequences unfold over the next 12 months.”
Jensen is intimately aware of the difficulties of the coronavirus, having caught the disease himself earlier in the year.
However, the pandemic itself is not entirely to blame, with analysts noting the company’s increasing debt.
“This shouldn’t come as a surprise to shareholders as rising levels or debt and increasing capex had already raised questions on short term dividend sustainability,” said Neil Shah, head of research at Edison Group.
BT has promised to invest the money saved as part of a £12 billion investment to accelerate the deployment of FTTP to 20 million homes by the mid-to-late 2020s. Jansen noted that the company was aiming to add more than two million homes to the network during the coming financial year.
BT declined to provide a financial outlook statement for the 2020/21 year, suggesting that uncertainty created by COVID-19 would make doing so impossible.
The UK’s largest operator also has another problem looming ominously on the horizon with the merger of O2 and Virgin Media being agreed today. The new competitor will be a significant threat, both in fixed and mobile connectivity, and is set to completely reshape the UK’s connectivity landscape.
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