Thursday 31 October 2019 11:47 am

BT keeps dividend alive despite heavy network spending

BT kept its dividend alive despite a hit to earnings and revenue in the first half of new boss Philip Jansen’s first financial year due to hits from regulation and legacy product declines.

The telco posted a flat profit and interim dividend as it pushes to try and roll out fibre broadband to 4m premises by March 2021.

Read more: Why BT’s house party with EE is about to end in a hangover

The figures

Revenue dropped one per cent to £11.47bn in the six months to the end of September as a result of tougher regulation and legacy product declines.


Year-on-year profit before tax remained steady at £1.33bn, but higher spectrum fees and content costs sent earnings before interest, tax, depreciation and amortisation (Ebitda) falling three per cent to £3.92bn.

Net debt rose to £6.1bn, while network investment knocked cash flow down 38 per cent year on year to £2.17bn.

BT maintained its interim dividend of 4.62p per share after scaring investors by cutting it this time last year. The telecoms giant also stuck to its full year financial guidance.

Why it’s interesting

BT’s share price fell one per cent to 199.9p in early trading before rising 0.5 per cent to 203p despite hits to Ebitda and revenue as it funnels cash into a network expansion.

Chief executive Jansen said BT’s network arm Openreach is accelerating the expansion of its fibre network, now connecting a home or business every 26 seconds.

But he said he wanted to speed that process up even more, and called on regulators to make that possible.

Jansen said BT could invest between £25bn and £30bn over the next eight years. But he warned that his speedy investment plan “doesn’t look like the most likely thing” with Ofcom yet to set out how it plans to regulate Openreach.


He called on Ofcom to move faster on deciding how it will regulate BT’s fibre network rollout arm so the telecoms behemoth can push on with its spending plans. 

“Regulations don’t get set in stone until April 2021,” he said. “My message to regulators is to bring that forward so we can get on with it.”

AJ Bell investment director said today’s results should “soothe a few nerves and help shareholders sleep more easily in their beds” after last year’s dividend cut signalled trouble ahead for BT.

But Steve Miley, a senior market analyst at Ask Traders, warned that BT’s results offered investors few answers on how BT will fully finance 5G and its full-fibre rollouts.

Job cut savings offset BT’s £936m spent on its network, a sum 18 per cent higher than last year as it ploughed money into rolling out 5G.

Speculation is rife that BT will raid its dividend to further extends its network but Jansen today only said he wanted to ensure shareholders receive “reasonable returns”.

“This lack of clarity [on BT’s dividend] is weighing on the share price,” Miley warned.

Saying BT already invests £4bn into its fibre network, Jansen told media on a conference call today: “What we are looking at is how could we do fibre [rollout] at the rate we would like to – it’s probably another £600m extra. How do we find that? We need to get the balance right.

“We have got different options but remember if we go really fast we will look at reprioritising some of that £4bn. If I get the green light to get as fast as possible we need to think about what the implications [of that spend].”

John Moore, senior investment manager at Brewin Dolphin, said BT was investing for the future.

“But there are signs of better times ahead,” he added. “We should see BT now start to pay down debt and reap the benefits of its capital spend. BT is one of those unlikely defensive stocks for tough times, which may make it an interesting prospect for investors.”

Jansen, who took over in February following the troubled reign of Gavin Patterson, is trying to steer BT through a three-year plan in a desperate bid to reverse heavy losses to the firm’s share price.

The company has warned of thousands of job losses in the coming years, and has announced plans to shut 90 per cent of its offices.

Jansen has also begun to sell off non-core parts of the business, and in July secured the sale of its London headquarters for £210m.

Read more: BT reveals new City headquarters as it plans to move by 2021

The telecoms stalwart has also revamped its logo, and last month announced its return to the UK high street, as Jansen pursues his plan to restore its status as a “national champion”.

The radical turnaround strategy already appears to have impressed investors, with shares recovering from their lows in August last year.

Earlier this year Jansen presented his full-fibre strategy to No 10 amid fears the government’s plan to roll out the new network by 2025 could be hampered by tough regulation.

The government has since pledged to invest £5bn in full-fibre. However, the latest figures from Ofcom showed the new network has so far reached just eight per cent of UK premises.

Today Jansen said that whoever wins the 12 December general election, he was confident full-fibre rollout should be their biggest priority.

“I hope that fibre-ing up the nation will be high up the list of priorities of whoever is in power,” he said.

“I would really like whoever’s in the seat in Downing Street to prioritise [that] and get it done as quickly as possible.”

Read more: Three warns of mobile mast ‘monopoly’ threat to the future of 5G

What BT said

Chief executive Philip Jansen said:

BT delivered results in line with our expectations for the second quarter and first half of the year, and we remain on track to meet our outlook for the full year.

“We’ve invested to strengthen our competitive position. We’ve accelerated our 5G and FTTP rollouts, introduced an enhanced range of product and service initiatives for both consumer and business segments, and announced price and technology commitments to deliver fair, predictable and competitive pricing for customers.

“Openreach is significantly accelerating its pace of FTTP build and is now passing a home or business every 26 seconds. Openreach announced a further 29 locations in its build plan to reach 4m premises by March 2021, and we continue to make positive progress with Government and Ofcom on the enablers to stimulate further investment in full fibre.

“We continue to make progress on the BT modernisation agenda, delivering over £1.1bn in annualised cost savings, and announcing locations in our Better Workplace Programme.


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