BT's ‘new wave’ mitigates fixed-line decline

BT Group's third quarter was buoyed by the continued growth of its IT services and broadband offerings, its so-called "new wave" services, while its traditional fixed-line business continued to decline. BT is having more success in certain areas than rival telcos, but it still has some significant challenges ahead.

For the quarter ending 31 December, BT reported a profit before taxation of £526m. Net profit fell to £386m from £445m the year before.

While the former monopoly still controls over two-thirds of Britain's residential telephone market, it has been hurt by cut-throat price competition, tight regulation and lower profits from calls from land lines to mobile phones, all of which bit into sales.

Revenue fell to £4.57bn from £4.70bn a year earlier. This included a 9 per cent fall in revenue from traditional voice services, but this was offset by significant growth in its "new wave" services, which accounted for 18 per cent of sales in the third quarter, equating to roughly £838m.

BT Group has had to seek alternatives for its declining fixed-line operations, and over the past few years has sought to diversify revenue streams with what it calls "new wave" businesses such as broadband internet connections, voice over internet protocol, and handling the IT needs of corporate clients.

BT said it offers broadband to 85 per cent of homes in the United Kingdom, and this should reach 100 per cent coverage during 2005. BT is regaining market share for directory enquiries, but still making less profit, after the service was opened to competition last year.

The BT Global Services division, which was formerly known as BT Ignite, has been boosted by recent outsourcing contract wins with Abbey National, and the UK National Health Service. Judging by these contracts, BT is proving more successful in adding services capabilities than other telecom operators such as Deutsche Telekom and France Telecom, but its challenge will be to convince the increasingly cautious CIO community to risk handing over a larger section of their mission-critical technology to a single company.

Source: ComputerWire/Datamonitor

Related research:
Datamonitor, "The evolving European business broadband market" (DMTC0951)