The ongoing success of BT’s consumer division contributed to a 24 per cent rise in pre-tax profits during the first half of 2018 – despite a two per cent fall in revenue caused by a decline in its business divisions.
In its first results since the confirmation that Worldpay co-CEO Philip Jansen would take over from Gavin Patterson as BT chief executive in February 2019, BT reported revenues of £11.6 billion and a net profit of £1.34 billion.
Consumer revenue rose by 3 per cent to £5.3 billion thanks to demand for high-end smartphones, growth in EE and BT Mobile’s SIM-Only base and the fact that all customers now pay for BT Sport. It also cited strong momentum for BT Plus, the company’s first converged network product, which has half a million subscribers.
This converged strategy is seeing BT invest in full fibre – 680,000 premises are now covered by fibre to the premise (FTTP) technology – and hold the UK’s first trial of 5G at Canary Wharf.
“We are successfully delivering against the core pillars of our strategy with improved customer experience metrics, accelerating ultrafast deployment and positive progress towards transforming our operating model,” said Patterson.
“We have maintained momentum in our enterprise businesses despite legacy product declines.”
Business and public sector revenues fell by 4 per cent to £2.2 billion as declining fixed line income was offset somewhat by growth in IP voice, mobile and networking services, while wholesale revenue dropped 8 per cent to £929 million. BT Global Services also contracted by 7 per cent to £2.3 billion while Openreach income fell by one per cent to £2.4 billion.
Patterson said the decline in Openreach was driven by up to £150 million in regulated price reductions and that he was pleased with the unit’s performance – especially the transfer of 31,000 staff to the legally separate company.
“On 1 October we completed the transfer of 31,000 employees into Openreach, a key part of fulfilling our DCR commitments,” he added. “Openreach has signed up the majority of its major and a number of its smaller communications providers to its new volume related discounts which should increase average broadband speeds across the UK.
“We are making positive progress on the key enablers to ensure that we can secure a fair return on our FTTP investment, and are ready to expand the FTTP programme up to and beyond 10 million premises if the conditions are right.”
Patterson’s departure was announced in June, shortly after he detailed a restructuring programme that would see BT cut 13,000 jobs mainly in back office and middle management roles – and vacate its St Paul’s headquarters in favour of basing itself at 30 sites around the UK. The strategy will also see BT hire 6,000 engineers and customer service agents, coupled with up to £3.7 billion annual investment in infrastructure.
The idea was that BT would be a more agile organisation capable of capitalising on demand for converged network services. However, this was not enough to ease all the concerns held by shareholders. Nevertheless, BT is continuing with the strategy with 2,000 roles already “removed”, and investors will be happy at the outcome.
“Our strategy is delivering, with benefits evident from the steps we’ve been taking to simplify and strengthen the business and improve efficiency,” he concluded. “Despite increasingly competitive fixed, mobile and networking markets and continued declines in legacy products there is no change in our overall outlook for the full year.”