BT profits on broadband growth
Company won a 56% share of new retail broadband subscribers in the last three months of 2011
BT accounted for over half of the UK’s new broadband subscribers in the last three months of 2011, as it indicated it would review its fibre broadband investment with a focus on getting businesses to pay for installation.
The company won a 56% share of new retail broadband subscribers, adding 146,000 in three months to take its UK total to 6.1 million customers. The announcement came as The chief executive, Ian Livingston, offered upbeat forecasts for the full year and a rise in third quarter earnings, prompting a 6% share price rise in morning trading.
An earlier commitment to running fibre cables to the doorstep of 25% of UK premises by 2014 is likely to be cut, with BT instead offering speeds of up to 330 megabits a second for businesses willing to pay to be connected.
“Fibre to the premises is a significant development for broadband Britain,” said Olivia Garfield, chief executive of BT Openreach, the division which resells the BT network to other telecoms companies and BT Retail. “This will be welcome news for small businesses who may wish to benefit from the competitive advantage that such speeds provide.”
BT previously said it would not offer fibre on demand, but after a trial with small businesses in St Agnes, Cornwall, it has changed tack. Individual customers will be able to request a personal fibre connection via its retail division and those of companies like TalkTalk and BSkyB.
The 330Mbps service will be available from spring 2013 and is likely to involve installation costs of up to £1,000. At that price, it is expected to appeal to small businesses rather than residential customers. It will only be available on streets that have fibre to the cabinet, likely to be over 10m premises from launch and about two thirds of UK premises from 2014.
The change is likely to delay fibre to the door for all but the wealthiest of households. So far only 10 of BT’s 1,450 exchanges have fibre to the doorstep of the homes they serve. But BT has previously announced that it is doubling the speed of its standard fibre broadband product, from 40Mbps to 80Mbps, from this spring.
A spokesman for BT said of the original 25% commitment: “That was only an estimate which we gave some years ago before we knew we could offer fibre on demand and home broadband speeds of 80 megabits. We will have to sit back and review that following these developments.”
BT’s promise to invest £2.5bn of its own money in rolling out fibre is likely to be maintained, a spokesman said, although the spend could be shifted to reaching a greater number of cabinets and to targeting blocks of flats for connection to the network.
The take-up of super-fast broadband has increased to 400,000 of BT’s retail customers, with 95,000 added in the three months to 31 December.
Elsewhere, Ian Livingston brought forward his target of generating £6bn in annual underlying earnings by 2013 to the end of this financial year. However, BT said its pension deficit ballooned to £4.1bn due to high inflation and the knock-on effect of the government’s quantitative easing measures.
Group revenue was £4.8bn for the quarter. Excluding the impact of cuts to mobile termination rates, revenue was down 1.8% in the first nine months, in line to reach BT’s target of –2% to flat for the full year, and halting years of revenue slides by the end of the next financial year.
Profit before tax was up 18% to £628m for the quarter, while earnings (before interest, tax, depreciation and amortisation) rose by 3% to £1.5bn in the quarter. Net debt fell 11% to £7.7bn, in line with previous quarters which have seen BT reduce its borrowings by £3.3bn over three years.