Broadband and IT deals drive BT profits ahead of forecasts

TELECOMS heavyweight BT Group posted higher-than-expected profits and sales yesterday, driven by consumers snapping up broadband services and multinational firms agreeing IT deals.

The second-quarter results, which enabled the group to reiterate its full-year outlook, sent shares in the group up 3 per cent as it outperformed peers in both corporate international services and domestic broadband.

BT said cost controls meant it could continue to invest, bringing forward its roll-out date for a fibre network in Britain and increasing its spending in Latin America.

The firm’s Scots-born chief executive, Ian Livingston, said: “It’s another quarter of progress. In terms of our overall expectations, probably some analysts will edge up their profit and cash flow numbers and people can feel even more confident about our numbers as a result of this quarter.”

He added: “But we’re not changing our overall guidance at this point. I think it’s still a little bit early in the year.”

The firm maintained its strong growth in the broadband market, adding 166,000 customers to its retail division. Some 88,000 customers signed up to the super-fast product BT Infinity, taking the base to more than 300,000.

In the past six months BT has added more than 514,000 customers on to the copper-based DSL and LLU network, either for customers to its own retail division or for rivals which access the network on a wholesale basis. Some 307,000 joined the network via BT Retail. In the corporate Global Services division, the other high-performing BT unit, core earnings in the three months to September were up 15 per cent.

Richard Hunter, head of equities at brokerage Hargreaves Lansdown, said: “The reiteration of full-year guidance has been well received, underpinned by particular strength in broadband and at its once beleaguered Global Services division.

“It also has a clear eye on future strategy with ongoing investment in fibre and, further afield, in the likes of Latin America and the Asia Pacific.”

BT, which competes with Virgin Media and TalkTalk and sells wholesale to rivals, has been steadily recovering after it issued profit warnings in 2008 and 2009 over the poor running of its Global Services division.

The country’s biggest fixed-line telecoms supplier has since slashed costs to grow profits, and shares have risen more than 100 per cent since it started to show signs of recovery in April 2009.

The only slight blip in the results was in the group’s pensions, which had a deficit of £2.5 billion net of tax compared with a shortfall of £1.4bn at the end of March. That has grown due to recent stock market volatility but analysts said it was expected.

Overall, BT posted second-quarter revenue down 2 per cent to £4.89bn, compared with an analyst forecast of £4.78bn, and core earnings up 3 per cent to £1.5bn.