BT's faith in fibre undimmed even as consumer headwinds mount

BT's faith in fibre undimmed even as consumer headwinds mount
By Reuters
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By Paul Sandle

LONDON – BT connected a record 155,000 customers to its fibre broadband in its last quarter, underpinning its confidence in its multi-billion pound investment despite pressure on cash flow and a darkening consumer outlook.

Philip Jansen, CEO of Britain’s biggest broadband and mobile operator, said demand for ultra-fast broadband was “extremely strong”.

“Customers love the product,” he told reporters after BT reported broadly in-line third-quarter revenue and earnings, and reaffirmed it full-year guidance on Thursday.

BT’s Openreach is building fibre, which is used by providers such as Sky and TalkTalk as well as BT, at a rate of 62,000 premises a week, and the take-up across all providers was 29%, with 324,000 net customer additions.

BT makes more money from fibre connections that are easier to maintain and highly valued by customers.

The cost of building a network to 25 million homes, however, is pressurising BT’s cash flow.

Jansen said a 20% increase in capital expenditure in the first nine months would slow in the fourth quarter, putting it back on track to meet its target.

BT’s revenue has been supported by an above-inflation price rise for consumers at the beginning of its financial year.

It will increase consumer prices by 14.4% at the end of March. Jansen said the rise was needed because the business was facing huge inflationary pressures, including energy.

“The price increase is about a pound a week,” he said. “What we provide, if you step back, is exceptionally good value for money.”

He said churn – the percentage of customers changing to a rival – was stable, and BT managed its customers carefully to ensure they were getting value for money.

He said the 50% of customers who re-contracted every year also generally changed to better products, for example combining broadband and mobile.

BT reported a 3% dip in revenue in the three months to end-December to 5.2 billion pounds ($6.4 billion), reflecting in part the disposal of its BT Sport broadcasting business.

The BT Sport move, however, boosted the bottom line. Adjusted core earnings rose 2% in the quarter to 2.01 billion pounds.

It shares reversed early losses on Thursday to trade 2% higher by mid-morning.

($1 = 0.8119 pounds)

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