BT builds a high-speed broadband super-highway as core profits rise

By SCOTT REID AND KATE HOLTON
Published on 04/02/2012 00:00

TELECOMS group BT pledged to step up the pace of its broadband expansion yesterday as it booked a modest rise in core profits.

The former monopoly, which has increasingly relied on deep cuts and operational efficiencies as its fixed-line business struggles, said cash generation for the three months to the end of December was up, despite a 5 per cent fall in revenues.

It added 146,000 retail broadband customers, however, representing 56 per cent of all net additions in the market, confirming its position alongside BSkyB as the main provider of broadband in Britain.

Take-up of the group’s super-fast BT Infinity product increased, with 95,000 customers added in the quarter, taking the base to more than 400,000.

BT promised “ultra-fast” broadband speeds of up to 300 megabits (Mb) a second by spring of next year. Its current speeds are closer to 40Mb, with most of the country seeing a theoretical maximum speed of 7.6Mb.

The roll-out, through the firm’s infrastructure division, Openreach, will see faster fibre cables installed between cabinets on streets and homes and businesses, which will also be made available to other providers such as Sky.

The “ultra-fast” service is likely to be most useful for small businesses and will be available on-demand in parts of the country where BT has already rolled out superfast broadband.

The group saw its net debt fall by some £1 billion, but its pension deficit jumped, reminding investors that cash and the company’s ability to raise its dividend could be constrained for some time to come.

Ian Livingston, BT’s Scots-born chief executive, said: “We have delivered another quarter of growth in profits and cash-flow despite the economic headwinds. These are a reasonable set of results.

“We’re seeing further cost reductions, and that’s despite very significant investment we’re making in the business.”

Livingston added: “We are becoming a more efficient and better business, but we’ve still got more to do.”

Sheridan Admans, investment research manager at the Share Centre, described the results, which cover BT’s financial third quarter, as “encouraging”.

He said: “Telecoms giant BT announced positive Q3 results that delivered good cash-flow generation and profit growth.

“However, as revenues were down by around 5 per cent, profit growth was mainly driven by cost savings.

“We are slightly concerned about this longer term and would like to see it supported by revenue growth.”

BT – which competes with Virgin Media, TalkTalk and other corporate providers – has been steadily recovering after profit warnings in 2008 and 2009 over the poor running of its corporate “Global Services” division, and has also invested heavily in new fibre networks.

The group posted third-quarter revenues down 5 per cent at about £4.8bn, slightly below forecasts. Due to continued strong cost control, core earnings were up 3 per cent at £1.5bn, in line with estimates.