BT’s second quarter underlying revenue hit by regulation, recession

1 Nov 2012

British fixed line incumbent BT has released its financial results for the three-month period ended 30 September 2012, with the operator revealing that its ‘key revenue trend measure’, underlying revenue excluding transit, had fallen 5.5% in the quarter compared to the corresponding period last year. Such a decline, BT said, was the result of ‘the negative impact of the accelerated contract milestones recognised in the second quarter of last year and the Court of Appeal decision on ladder pricing’, with those two items accounting for 1.9 percentage points of the decline. Further, the telco said that underlying revenue continued to be impacted by the difficult economic conditions across Europe and in the financial services sector, as well as by regulatory price reductions and lower revenue from calls and lines.

In the operator’s second fiscal quarter of the 2012/13 financial year it generated a reported turnover of GBP4.389 billion (USD7.1 billion), down 2% year-on-year, having benefitted from lower specific item charges to revenue compared with the prior year. However, BT’s adjusted revenue measure, which excludes specific items, was down 9% year-on-year at GBP4.474 billion, a figure which it noted represented a larger decline than in recent quarters. Underlying operating costs before depreciation and amortisation for the quarter were down 10% y-o-y, while excluding the costs associated with the accelerated contract milestones in the prior year they fell 9%, with BT saying that this reflected ‘the impact of our cost efficiency programmes and reduced cost of sales due to the decline in revenue, including lower payments to other telecommunications operators’. Adjusted EBITDA in 2Q12/13 was broadly flat at GBP1.497 billion, and excluding a GBP7 million negative impact from foreign exchange movements and a GBP4 millon impact from disposals, underlying EBITDA was up 1%.

With regards to its operational performance, BT noted that it has now passed more than 12 million premises with its fibre broadband, and the telco revealed that it now has more than 875,000 retail fibre on its books, having signed up around 160,000 such subscribers in the quarter. Looking ahead, the telco has also confirmed that it is once again accelerating the fibre rollout, and it has said it now expects to have extended its fibre footprint to two-thirds of UK premises by spring 2014, more than 18 months ahead of its original schedule. Meanwhile, BT added 81,000 retail broadband subscribers in the quarter, which it claimed represented 47% of the country’s broadband market net additions in the period.

Commenting on the results, Ian Livingston, BT’s Chief Executive Officer, said: ‘We have delivered another solid quarter of growth in profit before tax despite the economic conditions and regulatory impacts. We continue to make significant investments in the future of our business and we are again accelerating our fibre roll-out. We now expect fibre to be available to two-thirds of UK premises during spring 2014, more than 18 months ahead of our original schedule, and we are recruiting more than 1,000 engineers in 2012 to help deliver this.’

United Kingdom, BT Group (incl. Openreach)