Broadband leads BT back to the land of rising dividends

BT HAS hoisted dividend prospects for shareholders over the next three years and promised a £300 million share buyback in this financial year as the telecoms giant’s financial health is boosted by accelerating broadband roll-out.

Britain’s biggest fixed-line telecom firm yesterday recommended a 14 per cent increase in the final dividend to 5.7p to its army of over a million small shareholders, giving a full-year payment up 12 per cent at 8.3p from 7.4p in the previous year.

That was on the back of underlying annual earnings up 3 per cent at £6.1 billion as BT’s Scots-born chief executive Ian Livingston said strong cash flows meant dividends would rise 10 to 15 per cent per year for the next three years.

However, shares in the telecoms giant fell 5.7p at 211.5p as the City felt the dividend news was not generous enough. BT had raised City hopes of even higher payouts last March when it struck a deal to pay down the £4bn deficit on its staff pension fund more quickly than previously planned.

But Livingston said yesterday the company had decided to be “a mixture of bullish and conservative” by rewarding shareholders but safeguarding future business growth opportunities.

He said the dividend was covered three times as investors had told BT that “we don’t want any doubt about the [sustainability of] dividend. We want to take it to the bank”.

Underlying revenues fell 1.9 per cent to £19.3bn as BT suffered falling income from calls as regulators continue to clamp down on prices. But the group benefited from the strength of broadband demand, adding over a million homes and businesses to its network in the year to end‑March. Of these, 589,000 were added through its own retail division.

The company’s fast-speed fibre broadband service is now available to ten million premises in the UK. Saying that less than 10 per cent of the company’s business was now telephone calls, Livingston added: “BT’s [broadband] roll-out has made Britain one of the most highly connected societies in the world.”

Meanwhile, TV service BT Vision has picked up 28,000 customers in the past three months – more than rivals Sky and Virgin combined. Recovery also continues at the previously troubled corporate Global Services division, with underlying earnings in the year up to £627m from £593m. Among contracts won in the final quarter of its financial year were Nato, Britain’s National Air Traffic Services and mining giant Anglo-American.

Livingston, who is also a non-executive director of Celtic football club, revealed that BT faced headwinds in its business with small and medium-sized companies, with revenues “down in mid-single digits”.

He said he expected revenues from the sector to recover later this year after a possible further testing next two quarters “but if we have a collapse in the eurozone, who knows?”