EE acquisition swells BT revenues 35% despite dip in earnings

The completed acquisition of EE earlier this year saw BT’s revenues swell by 35%, despite bringing in reduced earnings year on year.

With the acquisition of the UK’s biggest mobile operator completed in January, the integration of EE into BT began in earnest at the start of April and in the quarter leading up to 30^th January, the mobile operator represented 21.5% of total revenues for BT. In context of the broader BT Group, EE generated the same amount of revenue as BT’s Global Services and under-fire Openreach divisions.

In all, BT generated £5.8 billion in revenue in the first quarter of FY 2016/2017. With an inflated premium television offering through the acquisition of more sports broadcasting rights, and the bundling of offers for BT Sport to EE customers, BT Consumer grew an impressive 9% year on year but still represents one of the smallest businesses in the Group.

Openreach, which was recently ruled by Ofcom to be treated as a separate legal entity within the BT Group, grew ever so slightly from £1.249 billion to £1.252 billion. Anything BT does with Openreach at the moment will be intensely scrutinised, and Group CEO Gavin Patterson reiterated the telco’s stance on the ongoing saga.

“Having listened to Ofcom and industry, we have set out our proposals for greater independence and transparency for Openreach,” he said. “Our proposals can form the basis for a fair, proportionate and sustainable regulatory settlement and we believe they can also enable Ofcom to bring its Digital Communications Review to a speedier conclusion. We will continue to engage with Ofcom over the coming months.”

Eyes are equally fixed on the performance of EE as they are on Openreach to see how its integration with BT will affect its performance. EE revenues fell in Q2 2015 on 2014 and declined again this year from £1.38 billion to £1.2 billion; but it looks like BT is trying to wipe the slate clean as it did not compare EE’s performance with previous years in its financial report.

“Our integration of EE is progressing well, alongside our business reorganisation that took effect on 1 April,” Patterson said. “EE performed strongly, both financially and commercially, and our customers are seeing the initial benefits of our acquisition with BT Sport now available to EE pay monthly customers. We remain focused on improving customer experience and 100% of EE pay monthly calls are now handled in UK and Ireland contact centres.”

While BT will not be too concerned today about the slight dip in EE’s performance, considering the scale of the ongoing integration effort and the natural disruption this will cause; it will want to see EE’s fortunes turnaround sooner rather than later, particularly in an increasingly competitive and commoditised mobile market.