BT net income rises 70%
The UK's biggest phone company, British Telecom, has posted a 70 per cent rise in profits, driven in large part by sales of overseas businesses.
Net income during its fiscal third quarter climbed to £653m, or £0.076 a share, from £385m, or £0.044 a share, a year earlier. A huge proportion of the profits came from the sale of BT's stake in two businesses, Eutelsat and Starhub, which brought in £284m. Sales rose to £4.584bn from £4.578bn a year earlier.
"Our transformation strategy has now delivered underlying revenue growth in four consecutive quarters, a significant milestone," said BT CEO Ben Verwaayen. "We have seen new wave growth of 35 per cent," he added, referring to non-traditional telecoms services like DSL broadband.
He said that broadband DSL connections amounted to more than 800,000 in the quarter, equating to a new connection every 10 seconds of every day. "We expect to achieve 5 million broadband DSL connections a year ahead of target," he predicted. The BT chief also pointed to the firm's growing Global Services business, which saw revenues rise by 10 per cent in the quarter.
Like most other traditional telecoms companies, BT faces fierce competition from smaller rivals as well as from mobile operators, which are stealing customers at a steady pace. To fight back, the company has turned to so-called new wave businesses, such as broadband, virtual mobile phone services and IT services.
Blazing this new trail has not been easy for BT nor for any of its peers in Europe, which have been forced to spend vast sums to upgrade their networks for high-speed internet. Former telecoms monopolies are also under the scrutiny of regulators such as the UK's Ofcom, which recently threatened to split BT in two if it did not become more cooperative in allowing competitors to access its network.
Overall, BT's new wave revenues were up 35 per cent to £1.12bn, while traditional revenue fell by about eight per cent. However, the results also showed that earnings before interest, tax, depreciation and amortisation slipped to £1.44bn from £1.47bn, which has been taken as a sign that the firm's huge investment in broadband infrastructure, new services and marketing has cut into margins.
Also on Thursday, in another sign that BT is committed to making a profit from broadband, the company said it would double the speed of its basic broadband service to 1Mbps, with its higher-grade service now running at 2Mbps. No pricing changes for the services were announced.
"BT is about giving value for money," said Ian Livingston, CEO for BT Retail. "Today we are offering customers up to four times the broadband speed without charging a penny more. It will allow customers to get even more from their broadband services for entertainment, education or communication."
Sponsored: Magic Quadrant for Client Management Tools