Pesky regulators dash hope of top line growth
IT SHOULD come as no surprise that BT chief Ian Livingston, a well-respected former bean counter, can cut costs. Operating costs fell by six per cent last year, enabling the group to grow earnings before interest, tax, depreciation and amortisation (ebitda) by three per cent to £6.1bn. That means the company has met its £6bn ebitda target a year ahead of schedule – no mean feat considering tough competition, tough times and even tougher regulators.
The top line tells a different story. Revenue was down by around four per cent over the year to £19.3bn, and even fell by 1.9 per cent on management’s preferred measure, which excludes the payments BT receives from rivals piggybacking on its network. No-one was expecting any great shakes in this department, but the result was at the lower end of management guidance of flat to minus two per cent.
BT Retail also passed a key target, and now provides super-fast broadband to 10m homes and businesses. Super-fast fibre is the future, and BT has stolen a very quick march on its rivals here, but it still lags behind on some other key metrics. It added 136,000 broadband customers in the fourth quarter, far less than the 216,000 at BSkyB. The group’s share of net new broadband additions was at its lowest for almost two years. Competition is getting tougher and BT must up its game. Fibre is only part of the answer.
Perhaps Livingston’s greatest achievement so far was the turnaround of Global Services, the BT arm that sells IT support to businesses. Now that he has the tanker ponting in the right direction, the results are less remarkable. Full-year order intake was down eight per cent, as clients neglected to renew their contracts. Still, no one is arguing the division should be cut loose as some were in its darkest days.
Management expects revenue to show an “improving trend” next year, having previously guided for flat to two per cent growth. Don’t expect much. New regulations on wholesale products are set to come into force while Ofcom has launched a new probe into leased lines. This could shave between £100m and £200m off any 2013 revenue growth. It is hard to grow the top line when those pesky regulators won’t leave you alone.