BT results – cut and paste?

By Julian Herbert

Ian Livingstone must have an autotext key on his laptop. This morning’s news release reads: “These results show that we are making progress. There is still a lot more to be done but our commitment to improved customer service and cost transformation is starting to deliver results.”

The news release on 12th November reads: “We have had another quarter of progress but there remains a lot more to do. With total cost reductions of over £900m in the first half, we have made significant headway towards our previous target of well over £1bn for the full year. We now expect to generate at least £1.6bn of free cash flow this year.”

Who said accountants weren’t imaginative? What it does demonstrate is that BT is sticking to the knitting: sorting out problems with the profitability of Global Services, concentrating on the generation cash and reducing costs. It isn’t terribly exciting and the pace is glacial, but it’s positive. Revenues were down in all four businesses, but underlying profitability rose a healthy 11 per cent year on year. BT Retail was once again the star turn, showing EBITDA improvement of 7 per cent year on year. Comparing revenues quarter on quarter is quite instructive too: the changes, even at business unit level, are so marginal that you could have been forgiven for thinking that Mr Livingstone had cut-and-pasted the numbers as well as his statement.

Looking things from a broadband perspective, a few things strike me as interesting:

1. Capex is down, compared to the same period in the previous year, for the third successive quarter. Yet at the same time, BT is cranking up its investment in VDSL roll out. BT is betting its house on VDSL.

2. BT Retail added 102,000 broadband subs in the last quarter. This is its best performing quarter since June 2008. Its market share remained constant, suggesting that the market overall grew at a faster rate in the final quarter of 2009. This is borne out by positive numbers from Openreach (up 231,000, best since March 2009) and BT Wholesale (up 14,000 the best since March 2005). The BT Wholesale result is staggering in its own right, but must point to the fact that LLU roll out has reached a natural peak, and what growth there is left in the market outside of areas covered by unbundled exchanges, is going to smaller ISPs and to the likes of Sky.

3. BT Vision has had its day. It is creeping towards the half million mark, but can’t quite get there.
Questions remain over where growth will come from and BT’s hole in the ozone layer – its pension fund deficit – is still (pardon the metaphor) up in the air, but from a narrow UK incumbent perspective (which is what after all, BT is) these results are pretty decent.

Read more from Julian Herbert on the Intelligence Centre