BT Profit Rises, Boosted by Broadband, TV--Update

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By Simon Zekaria

LONDON--BT Group PLC (BT) Thursday said it is on track to meet its full-year expectations after it recorded a rise in first-quarter profit despite lower revenue, due to a boost in demand for its fiber-optic broadband service and sports television channels.

The U.K.-based telecommunications incumbent, which is buying mobile operator EE in a multi-billion dollar deal, said net profit in the three months to June 30 rose to 511 million pounds ($798 million) from GBP441 million a year earlier.

Earnings before interest, tax, depreciation and amortization on an adjusted basis rose 1% on year to GBP1.45 billion, in line with consensus market expectations. Previously, BT said it expected "modest growth" in adjusted Ebitda in fiscal 2016.

Still, revenue fell 2% on the year to GBP4.28 billion, hit by currency movements, and came in lower than market forecasts. While the firm's consumer division posted 3% revenue growth as more customers switch on to faster Internet broadband and its pay-TV service, the group's global services and business divisions recorded a 6% and 2% slide in revenue, respectively.

BT says its core revenue metric is improving quarter-on-quarter. Revenue excluding transit operations and exceptional items was flat, compared with a 1.3% decline last quarter and it expects the metric to show "growth" this year.

"This is an exciting time at BT," said Chief Executive Gavin Patterson.

BT is plowing investment into its network and sports TV channels business, both in terms of infrastructure and content, as it battles hard with other operators like Sky PLC and Liberty Global PLC's Virgin Media in the U.K.'s rapidly-developing "bundled" consumer media and telephony sector. BT is also stripping out costs in the business to boost profitability at a time when it is spending billions of dollars on exclusive sports TV rights, such as the English Premier League and Europe's Champions League soccer competitions--two of the most-watched global soccer competitions.

In the fight with rivals to offer a full range of telephony and media services, BT has paid billions of dollars to secure key exclusive live English and European soccer TV rights to bulk up its sports channels.

It said it added 60,000 TV customers in the quarter, taking its TV customer base to 1.2 million.

BT's sports-broadcasting platform is key to its core broadband business and to plans to compensate for declining fixed-line telephony customers, that is bringing stiff competition to the pay-TV market. BT said it has 3.2% consumer fiber broadband customers, adding 217,000 in the first quarter. 41% of BT's broadband customer base is now on fiber, it says.

Mr. Patterson also said more than 100,000 consumer mobile customers have signed up, as the operator bids to complete the EE deal, which is being scrutinized by regulators.

However, at 0921 GMT, BT shares fell 2.3% to 462 pence, valuing the company at GBP39.5 billion. Raymond James analyst Stephane Beyazian said BT is facing an "unprecedented" string of moves by competitors in the U.K., giving it less room to raise prices.

BT is also fighting off calls by rivals for the firm to separate off from Openreach, its infrastructure unit. Thursday, the division posted flat revenue, held back by the impact of regulation.

Write to Simon Zekaria at [e-mail]

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