As its journey back to focusing on core networking progresses, BT has issued a nine-month trading statement showing the current strength of its Openreach broadband provision division, with its performance in rolling out full-fibre gigabit connectivity compensating for overall annual declines in service revenues.
At the end of the nine months to 31 December 2021, BT reported total revenues of £15.676bn, down 2% year on year, driven by declines primarily in the company’s Global and Enterprise business lines but partly offset by Openreach’s growth, which was 4% year on year, totalling £1.361bn. Consumer revenues for the period were essentially flat compared with the year before, amounting to £2.585bn, but Enterprise revenues tumbled 6% year on year to £1.295bn. Overall profit before tax was £1.537bn, 3% down on the same period a year ago.
For the nine months, BT’s capital expenditure was up 24% annually to £3.752bn, mainly due to investment in spectrum, FTTP and the EE 5G mobile network.
Drilling deeper into the Enterprise line, revenue was said to be down because of continued declines in legacy products and contracts, and the ongoing migration of an MVNO customer in Wholesale. EBITDA fell, with the reduction in revenue partly offset by lower costs, including the benefit of BT’s cost transformation programme, strong delivery performance in the Emergency Services Network and a £10m gain on fixed asset disposals in Wholesale.
EBITDA fell in the quarter, reflecting trading declines as well as the timing of profit recognition within some of BT’s larger contracts, partly offset by cost savings. A notable deal highlighted was BT Wholesale securing a significant multi-datacentre contract with BAI Communications to deliver connectivity systems for London Underground. On a 12-month rolling basis, Retail order intake fell by 16% to £2.7bn and Wholesale order intake fell by 22% to £0.9bn, largely due to major contract extensions in Q4 FY20.
By contrast, for Openreach it was all about revenue and EBITDA growth, with a record-breaking quarter on BT’s full-fibre build and a 37% increase in fibre-to-the-premises (FTTP) connections. BT delivered a record FTTP build of 662,000 in the third quarter at an average rate of more than 50,000 a week, and the company said it was a quarter of the way through its 25 million premises build target with a footprint of 6.5 million.
BT’s FTTP base now has more than 1.5 million end-customers, a growth of 244,000, in the quarter ended 31 December. Over 64% of FTTP orders in Q3 were for ultra-fast speeds, and 48% of all FTTP orders in Q3 were from communication providers external to the BT Group. The company’s rural build was said to be progressing well, with two million premises passed.
Revenue growth was driven by higher rental bases in fibre-enabled products, up 10%, and Ethernet, up 6%. This was partially offset by declines in legacy products, including a reduction of 175,000 WLR voice lines supporting FTTP lines. EBITDA grew with revenue growth, lower repair volumes, ongoing efficiency programmes and a £10m one-off in the quarter partially offset by higher operating costs. The increase in operating costs was mainly driven by increased FTTP provisioning activity, higher running costs, recruitment and investment in people.
“BT has had a good quarter with encouraging market share performance, and we continued to make significant improvements in customer service, although revenue from our enterprise divisions was softer than we expected,” said BT chief executive Philip Jansen about the nine-month trading statement. “We had another record-breaking quarter on our full-fibre build and a pleasing 37% increase in FTTP connections following the launch of Openreach’s wholesale pricing offer. Our 5G build is also on track and now covers over 40% of the UK population with independently verified network leadership.”
As it was releasing the results, BT also announced what it called two important strategic partnership announcements on how it moves forward in content and TV. In addition to a partnership with Sky, it announced it had entered into discussions with Discovery on a new joint venture between BT Sport and Eurosport UK.
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