BT Beats Quarterly Earnings Estimates on Cost-Cutting Push

(Bloomberg) --

BT Group Plc beat quarterly earnings estimates as a cost-cutting push under Chief Executive Officer Philip Jansen is showing progress in transforming the former state monopoly.

• The British phone carrier said fiscal first-quarter earnings fell 1% to 1.96 billion pounds ($2.37 billion) before interest, tax, depreciation and amortization, in a statement on Friday. That was better than the 1.89 billion pounds expected by analysts in a company-compiled consensus.

Key Insights

• The report is a sign Jansen’s turnaround strategy is coping with regulatory pressures and intense competition for British broadband customers. He’s reining in costs with restructuring, job cuts, office consolidation and potential unit sales. To pay for a faster fiber rollout he’s also weighing borrowing more or following Vodafone by cutting the dividend.
• Jansen, who took over in February from Gavin Patterson, said the company is ready to speed up its full-fiber broadband build, as new Prime Minister Boris Johnson brings forward a target to connect every home.
• Johnson has hired a former Sky executive who has said that London-based BT’s fixed network should be split off, accelerated a deadline to connect every home to full fiber to 2025 instead of 2033, and must decide on restrictions for key supplier Huawei Technologies Co.
• BT is being challenged on mobile by Vodafone Group Plc and CK Hutchison Holdings Ltd.’s Three U.K. Its fixed-line business faces competition from alternatives such as CityFibre Ltd. along with pricing and bundling pressure from the likes of Comcast Corp.’s Sky and Liberty Global Plc’s Virgin Media.

Market Reaction

• BT shares fell 2% as the Stoxx Europe 600 Index dropped 1.3% on trade tensions. The company has fallen 21% year-to-date versus a 1.7% decline in the Stoxx Europe 600 Telecommunications Index.

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• See the numbers here
• Jansen said: “On network investment, we welcome the Government’s ambition for full fibre broadband across the country and we are confident we will see further steps to stimulate investment. We are ready to play our part to accelerate the pace of rollout, in a manner that will benefit both the country and our shareholders, and we are engaging with the Government and Ofcom on this.”
• NOTE: BT Faces Political Overhang Under Boris Johnson, Berenberg Says
• NOTE: Liberty Global’s New U.K Boss Ramps Up Speed War With BT

To contact the reporter on this story: Thomas Seal in London at tseal@bloomberg.net

To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Jennifer Ryan

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