BT just had a really great quarter

Lynsey Barber
Follow Lynsey
Fireworks Mark 1000 Days Till the London Olympics
BT had a good start to the year (Source: Getty)

BT surged ahead despite concerns over its Openreach business, sending shares three per cent higher in early trading.

The figures

Revenues at the telecoms firm jumped 35 per cent in the first quarter to £5.7bn while pre-tax profit increased by 13 per cent on the same period last year to £717m.

The recently acquired EE landed 244,000 additional customers and churn fell to a record low while revenue here was £1.2bn, giving BT a boost.

Openreach revenue was flat at £1.3bn while consumer revenue was up nine per cent to £1.2bn.

Net debt climbed to £9.6bn, up from £5.8bn in the same period last year, while capital expenditure increased 18 per cent to £777m.

28 July 2016 @ 8:45amBT Group (BT.A)

Why it's interesting

All eyes have been on BT's business as regulators and MPs scrutinise its Openreach broadband business. Avoiding a break up by Ofcom earlier this week, MPs are still pushing for better reforms, but BT has promised to make changes to stave off any action - something BT boss Gavin Patterson reiterated again today.

BT earlier this year acquired mobile provider EE in a billion-pound deal to offer customers so-called quad play services (phone, TV, internet and mobile) while also splashing the cash on sports broadcast rights.

Its latest numbers come off the back of its best ever year for the 2015 financial year.

What BT said

"We've made a good start to the year, with growth in revenue and strong cash flow. We're on track to deliver our full year outlook," said Patterson.

"Our integration of EE is progressing well, alongside our business reorganisation that took effect on 1 April. 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 per cent of EE pay monthly calls are now handled in UK and Ireland contact centres. We've reduced engineer missed appointments by more than a third since last quarter and Openreach is again ahead on all 60 minimum service levels set by Ofcom."

What the analysts say

"BT has acted decisively to target the quad play market that large telecoms are currently chasing, comprising mobile, TV, broadband and landline services all in one package. By bundling these services together, it’s hoped that customer churn will reduce, which in turn supports revenue and profit visibility," said Hargreaves Lansdown's George Salmon.

"Offering Premier League football games on a non-subscription basis, by coupling them with a BT broadband package has worked out nicely for the group. Since this offer was launched, BT has enjoyed the highest share of new broadband additions. With a vast fixed line customer base already, the final piece in the jigsaw was the acquisition of EE, which completed earlier this year and gives BT mobile market leadership too."

"If the theory behind the quad-play strategy proves correct, BT are in an excellent position"

ETX Capital's Neil Wilson noted that BT's ballooning pension costs were still a worry while it's increasingly facing competition from the likes of Amazon and Netflix rather than the traditional rivals such as Sky and TalkTalk.

Related articles