BT results fall on weak business market, Italian problems

BT reported organic sales down 1.5 percent in its fiscal third quarter to December, as growth at EE and its consumer business was offset by weakness in the business and wholesale markets. Adjusted for the takeover of EE and excluding transit revenue, Global Services posted revenue down 7 percent, hurt by the accounting problems in Italy and difficult international corporate markets, BT said. Organic sales, which exclude transit revenue, also were down 1 percent at Openreach, and 6 percent lower at the Business and Public Sector division, due to public sector weakness in the UK. Consumer revenue meanwhile grew 4 percent, and EE's sales increased for the first time its history, with growth of 2 percent, thanks to the success of the ‘more for more’ pricing strategy, BT said. 

On a reported basis, revenues rose 32 percent to GBP 6.128 billion due to the takeover of EE last year, and adjusted EBITDA increased 18 percent to GBP 1.870 billion. Organic EBITDA was down 8 percent, after a 2 percent rise in underlying costs due to the costs of acquiring football rights, introducing handsets at BT Mobile and investments in improving customer experience. Excluding the results of the Italian business, organic EBITDA was down 3 percent. 

BT's pretax profit fell 37 percent to GBP 526 million, hurt by additional depreciation and financing costs for EE, and net earnings dropped 59 percent to 3.8 pence per share. This also included another GBP 100 million charge for the Italian business. Capital expenditure jumped 47 percent to GBP 857 million, leading to a 33 percent fall in normalised free cash flow to GBP 606 million. The latter was also affected by the unwinding of inappropriate working capital arrangements in Italy, BT said. 

At the consumer division, BT added 83,000 retail broadband customers in the quarter, which it estimates is 44 percent of market net additions. Its fibre broadband base grew by 260,000 to 4.7 million, with 51 percent of broadband customers now on fibre. The TV customer base grew by 52,000 in the three months to 1.7 million. 

The mobile base was unchanged compared to Q3 at 30.2 million, as the addition of 276,000 postpaid customers was offset by the loss of 326,000 prepaid users. The 4G customer base reached 18.2 million, and LTE geographic coverage was at 75 percent, ahead of a goal of 92 percent by September. EE also started switching on its 800 MHz spectrum in November, helping improve indoor coverage. Monthly mobile ARPU was GBP 26.7 for postpaid customers and GBP 4.7 for prepaid customers in Q3, and postpaid churn remained low at 1.1 percent.