Still no news on CEO, but BT results show promise

We’re still no closer to finding out who will be leading the BT business into the era of 5G, but investors seem happy with the first quarter performance as share price creeps up 3%.

Total revenues for the quarter stood at $5.7 billion, down 2% compared to the same period in 2017, though the consumer business saw growth. The consumer unit, led by former EE CEO Marc Allera, was up 2% with the enterprise business unit and regulation enforced price reductions wiping out the positive steps forward.

“We’ve made a good start to the year,” said CEO Gavin Patterson. “We are making positive progress against our strategy. Our customer experience metrics continue to improve and we have seen the successful launch of new converged products including BT Plus, our first Consumer converged offering and 4G Assure, for business customers. Initiatives to transform our operating model have seen a gross reduction in c.900 roles across the Group and improved cost performance.”

Growth in the consumer business was led by an increased mix of high-end smartphones, growth in the SIM only base and customers now paying for BT Sport. Operational costs were flat across the period, though the team expect sports rights and device costs to increase later in the year. The ‘Best Connected’ strategy, BT’s play to make use of the broad assets available to woo customers, also looks to have gotten off to a promising start, with the team claiming 100,000 customers signed up across the quarter.

In terms of investment, BT’s CAPEX column on the spreadsheets was £839 million, a healthy 14.7% of total revenues. £428 million was invested in the fixed network, while £150 million was allocated to systems and IT and £224 million on what BT describes as ‘customer driven investments’.

Looking at the more negative side of the results, revenue decline in the enterprise business was blamed on lower equipment volumes, migration from fixed voice to IP, and the impact of EU roaming regulation on mobile. In Global Services, BT said its own decision to reduce low margin business was the primary reason for the dip, while decline at Openreach was driven by £90 million of regulated price reductions on our FTTC and Ethernet products and a decline in physical line base.

The bad bits wiped out any growth which the consumer business might have been able to conjure up, but considering the opportunity which is in front of BT, investors have every right to be excited. Convergence is a tricky game to play, but with the assets and customer base available to BT, the opportunity to make money is right in front of the team.

The first steps have been made towards the convergence dream, but announcing the new CEO should come sooner rather than later. Our Gav might be steadying the ship for the moment, but the business cannot operate effectively without a long-term leader for much longer. Despite the opportunities, investors might start getting nervous before too long with a new CEO named.