News
U.K. incumbent reports strong consumer broadband, mobile additions; pension deficit surges by 3.3 billion.
BT on Thursday reported a modest increase in underlying revenue and healthy growth in consumer broadband and mobile customers during its fiscal second quarter; however, EE’s topline seemingly continued to fall.
The U.K. incumbent’s group revenue for the three months to 30 September came in at £6.01 billion (€6.74 billion), up 35% year-on-year thanks to the contribution from EE, which became part of BT in January. Excluding EE and transit, BT’s revenue edged up 1.1%.
"We’ve made good progress on the integration of EE and the delivery of our synergy targets," said BT CEO Gavin Patterson, in a statement.
EE generated revenue of £1.28 billion during the quarter. BT did not provide a figure for the same period a year ago, but EE’s own financial report for last year suggests that revenue fell considerably. EE’s operating revenue in the quarter ended 30 September 2015 was £1.51 billion.
BT does not separate out subscriber figures for EE, but its total mobile customer base stood at 30.2 million at the end of September, down sequentially from 30.3 million. The telco added 280,000 postpaid mobile customers, but its prepaid base declined by 325,000.
Revenue at BT’s Consumer division jumped 11% to £1.25 billion. The company added 76,000 retail broadband customers, representing 65% of the U.K. market’s DSL and fibre-based broadband net additions. BT added 216,000 retail fibre broadband customers, taking its customer base to 4.5 million. BT also added 63,000 TV customers, giving it 1.7 million in total.
BT’s Business and Public Sector division continued to struggle. Reported revenue increased 15% year-on-year to £1.18 billion; however, excluding transit and EE’s contribution, revenue fell 7%.
"The public sector remains a challenging environment, and we still expect to see headwinds from the completion of contracts in this market for this year and next," BT said.
At Global Services, revenue surged 16% to £1.41 billion, thanks to a £137 million forex benefit and a £6 million increase in transit revenue. Underlying revenue grew 3%. Global Services’ order intake for the quarter was £1.5 billion, up 10% on last year.
BT’s infrastructure arm Openreach reported flat revenue of £1.27 billion, as regulatory price reductions had an impact of around £60 million. This was partially offset by a 37% increase in fibre broadband revenue, BT said.
Meanwhile BT Wholesale and Ventures saw revenue decline 9% to £522 million, driven mainly by the fact that revenue from services previously provided to EE are no longer recognised now that EE is part of BT.
BT’s group adjusted EBITDA grew 31% from last year to £1.89 billion, absent EE, EBITDA was up 0.9%. Adjusted Pretax profit increased 24% to £873 million.
"This is a positive set of results, both operationally and financially, and we remain on track to achieve our full year outlook," Patterson said.
BT expects underlying revenue growth in 2016-2017, and adjusted EBITDA of £7.9 billion.
What will be of concern to investors though is BT’s pension deficit, which shot up by £3.3billion during the quarter to £9.5 billion.
The telco attributed the increase to falling corporate bond yields and higher-than-expected inflation, which coincided with the Bank of England’s announcement of fresh quantitative easing.
