Profits, revenues fall but BT expands 5G, fibre in first quarter

UK incumbent telco sees profits and revenues fall, but increases capital investments in next-generation wireless and extends Microsoft strategic partnership

BT has announced first-quarter results showing overall falls in profits and revenues but also marked increases in capital investment in 5G and fibre networks.

For the three months to 30 June 2021, BT reported revenue of £5.071bn, down 3% compared with a year ago. While other business lines struggled, revenue grew in BT’s Consumer and Openreach divisions.

Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the quarter was £1.866bn, up 3%. All units have delivered EBITDA growth, with the exception of the Global business line, and reported profit before tax was £536m, down 4% despite the higher adjusted EBITDA, primarily due to the prior year gain on disposal of domestic Spanish operations.

BT’s capital expenditure rose by 63% compared with the same quarter a year ago to £1.507bn, primarily due to investment in spectrum, in particular 5G, said the company. Capital expenditure, excluding spectrum payments, was up 9% to £1.011bn, primarily due to fibre-to-the-premises (FTTP) provisioning activities, mobile network spend and non-network infrastructure.

The company said its Enterprise division showed strong EBITDA growth, driven by lower costs, although its revenue was down, primarily due to continuing declines in legacy products, in particular fixed voice, which fell by 8%, the ending of some legacy contracts over the past year, and a decline in low-margin equipment sales.

Wholesale mobile revenue fell by 8%, primarily due to the ongoing migration of an unnamed mobile virtual network operator (MVNO) customer. This was partly offset by growth in new products and retail mobile revenue. Revenue was flat in SME business, but declined in corporate and public sector and wholesale. Retail order intake fell 16% to £2.8bn and wholesale order intake fell 11% to £0.9bn on a 12-month rolling basis.

BT attributed the declines in both retail and wholesale orders largely to major contract extensions in the fourth quarter of 2020. Retail order intake in the quarter was £700m, up 43% annually. Wholesale order intake in the quarter was £100m, up 28% on the same period in the previous year.

Looking at the areas in which it had made capital investments, BT noted that in the quarter, it had increased its FTTP base by 107,00 quarter on quarter, its largest-ever quarterly increase. The company’s 5G ready base stood at more than four million.

Revenue and EBITDA growth at broadband provision division Openreach was driven by full-fibre volumes, it said. Revenue growth was driven by higher rental bases in fibre-enabled products, up 14%, and Ethernet, up 7%, and higher provisioning due to the Covid-19 impact of suppressed activity in the first quarter of the previous year. This was partly offset by declines in legacy copper products.

BT said that by 30 June 2021, its FTTP base amounted to over one million end-customers and over 50% of new customers were buying ultra-fast broadband products.

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During the quarter, the company also implemented a new operating model with what it called a sharper segment and commercial focus. This included the creation of a new segment dedicated to SoHo (single/small office, home office) customers, an area of significant growth serving millions of UK firms. Also, it revamped its converged Halo for business broadband bundles to offer mobile back-up, complete Wi-Fi and full-fibre speeds of up to 900Mbps.

BT chief executive Philip Jansen said: “We’re powering ahead with our network build programmes. Openreach has now built full-fibre broadband to more than five million premises with growing customer demand, and EE has set out plans for 5G on demand anywhere in the UK by 2028. We’ve also reached a partnership agreement with our largest trade union, the CWU, allowing us to keep our modernisation plans on track.”

Jansen said a key part of BT’s ongoing strategy would be to invest in new strategic growth areas and part of this is an expansion of its existing strategic partnership with Microsoft. This will see it accelerate development across all areas of its business, including enterprise voice and cyber security for use in applications areas in sectors ranging from digital manufacturing to health. The partners believe their work can set businesses in the UK and around the world back to growth.

The partnership will provide users of BT-managed Microsoft business services with “outstanding customer experiences” by integrating their Microsoft applications with secure and reliable connectivity and cyber security, said the company. 

BT has already been one of the first development partners for Microsoft Operator Connect and Operator Connect Conferencing. The renewed agreement will allow BT to build on this relationship and offer its own branded global managed voice services directly through Microsoft Teams – an approach that further enhances customer experience and creates new opportunities for growth. BT said the number of users of managed Microsoft Teams collaboration service has almost doubled during the past 12 months.

Omar Abbosh, corporate vice-president of industry solutions at Microsoft, said: “The partnership announced by Microsoft and BT is just the start of an exciting, shared journey of innovation and collaboration that will shape the future of telecoms. BT can use Microsoft’s cutting-edge tools to develop new communications services that meet the needs and demands of today’s customers. By aligning our visions for communication, connectivity, security and digital technology, Microsoft and BT will support real growth for businesses across the world.”

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