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SBD Global/August 1, 2014/Finance

BT Reports Rise In Quarterly Profits After Cost Cuts And Consumer Broadband Growth

BT "reported a rise in quarterly profits, boosted by cost-cutting at its global services division and continued growth in consumer broadband," according to Henry Mance of the FINANCIAL TIMES. Pre-tax profit at the telecom group rose 7% year-on-year in the three months to June to £638M ($1M), after adjustments for specific items. Revenues rose 0.5% to £4.4B ($7.4B) on a like-for-like basis, "slightly ahead of analysts’ expectations." However, Morgan Stanley analysts cautioned that "the sizeable pension deficit and the upcoming Premier League auction would continue the cloud the company’s outlook into 2015." BT’s consumer division "drove growth in the last quarter, increasing operating profits" by 7% year-on-year to £183M (FINANCIAL TIMES, 7/31). REUTERS' Kate Holton reported BT "transformed its business in recent years by cutting costs and launching new services, investing heavily on sports rights." That "has enabled it to grow earnings and profits" and to compete with pay-TV leader Sky. It added 104,000 new broadband customers in the three months to the end of June, "well ahead of the 50,000 added by Sky and it now has over 2.3 million customers on its fibre network" (REUTERS, 7/31).

GROWTH SLOWING: In London, Juliette Garside wrote growth in BT's pay-TV business "has slowed." Excluding inactive customers, "the rate of net new subscribers has slowed to 40,000, the lowest rate for five quarters." The end of the football season "is partly to blame, with viewers waiting until August to sign up for sport, but growth is well below the peak of 70,000 new signings in the quarter ending September last year, just after the launch of BT Sport." The sports channels "have an estimated 5 million viewers," because BT gives its channels away for free to broadband customers, and because Virgin Media homes "can tune in at no cost if they already pay for Sky Sports" (GUARDIAN, 7/31). Also in London, Nic Fildes wrote "BT’s gamble on launching sport channels appears to be paying off" after it won more broadband customers than arch-rival Sky for the fourth straight quarter. BT said that "it added 104,000 new customers in the first quarter compared witho 50,000 for Sky and 10,000 for TalkTalk." BT did not reveal how many people had subscribed to its sports channels, which was described as "disappointing" by some analysts who said that "guidance appeared to be for only a slight increase." The foray into sport "has also come at a cost," with operating expenses at its consumer division up 12% (LONDON TIMES, 7/31).
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