Earnings: BT Profits Nosedive But Next Gen Broadband Roll-Out Will Continue

BT CEO Ian Livingston

“Low key” is how BT (NYSE: BT) CEO Ian Livingston describes his company’s Q1 results: it’s revenue and profits are falling, broadband adds continue to go up… but not spectacularly so. For the three months to June 30 the company made three percent less revenue at £5.23 billion, at constant currency levels — dragged down by a £124 loss at the Global Services division — and profits of £272 million after staff leaving costs, a 45 percent drop year on year.

Livingston told analysts in a conference call this morning that this might be a “good quarter, but its only a quarter…” and that the company’s £1.5 billion investment to bring next gen fiberoptic broadband to 40 percent of the UK by 2012 will continue despite revenue falls.

Release | Webcast | Slides

Broadband adds: Retail revenue declined by two percent to £2.11 billion but it still added 78,000 ADSL and local-loop unbundled customers with its overall total remaining at 4.8 million, still the country’s largest ISP even after the merger of TalkTalk and Tiscali. It’s share of total UK net additions across the market was 46 percent. Average revenue per customer was up £3 on Q4 to £290.

Superfast broadband: Businesses and homes — no word on how many — are now receiving superfast broadband one year after BT announced the roll-out and the company will “pick up the pace even more” on that front. Standard residential customers will benefit from the upgrade to ADSL+2 technology this summer. BT won’t benefit from Digital Britain’s proposed 50p broadband tax until it becomes law, but Livingstone added that individual local authorities can negotiate their own broadband contracts, as authorities in Cornwall and Northern Ireland have: “We may see other regions recognise there are economic benefits from rolling out their own next generation broadband networks”. He said there may be more FTH connections than previously planned.

BT Vision: The IPTV service added 38,000 customers in the quarter to give it a total of 433,000. That number should be higher — it was 423,000 in May — but a “data cleanse” has wiped out several thousand inactive customers who have since stopped their subscription. On New Vision CEO Marc Watson’s call for BSkyB (NYSE: BSY) to sign a distribution deal with the service, Livingston said: “Sky is an important customer to BT… we would like them to become the same sort of supplier to us.” Referring to a Ofcom investigation into Sky wholesaling its content, he said: “It would be regrettable if that was forced upon them, but we want to work with them”.

Outlook: Still cautious: BT seems pleased to have done this well during a potentially devastating recession and it re-states its 2009-10 full year prediction of a revenue drop of four to five percent. BT’s on course to making savings of £1 billion this year — staff costs dropped 12 percent in the quarter to £1.21 billion.

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