Revenues slip but BT claims solid Q1 2024

BT Group is claiming to have made a solid start to its 2025 financial year, boasting no less than “excellent” growth in both fibre network build and connections, and increased EBITDA.

In its trading update for the three months to 30 June 2024, BT said ongoing cost transformation had contributed to EBITDA growth, offsetting expected revenue declines in Consumer and Business divisions in the quarter.

Total revenues for the quarter amounted to £5.052bn, down 2% on an annual basis. Adjusted revenue was £5.1bn, said to be down 2% on Q1 FY24 due to legacy managed contract declines, reduced low margin sales activity and contraction in the company’s portfolio unit in the Business division, and the continued shift to mobile SIM only and a lower CPI benefit in a competitive market in its Consumer division. This was partly offset by price increases and fibre-to-the-premises (FTTP) and Ethernet base growth in Openreach. Reported revenue was £5bn, also down 2% compared with the same period a year ago.

Looking at business line revenues, Consumer inched down 1% to £2.399bn, while Business fell 5% to £1.933bn. By contrast, the Openreach broadband provision unit saw revenues rise 2% to £1.558bn.

Drilling down into select business performance, the trading report showed that Openreach broadband ARPU grew by 6% year-on-year due to price rises and increased volumes of FTTP. Business financial performance continues to be impacted by legacy managed contract declines, reduced low margin sales activity and contraction in the portfolio unit offset by cost transformation.

The quarter saw record FTTP build of over one million premises passed in the quarter at an average build rate of 78,000 per week. The BT FTTP footprint is now 15 million premises, with 4.2 million rural units passed and around a further six million where initial build is underway. The BT FTTP customer base surpassed five million during the quarter, with orders soaring up 29% year-on-year.

The company’s retail FTTP base grew year-on-year by 36% to 2.7 million, of which Consumer 2.6 million and Business 100,000. BT also showed strong growth of its 5G mobile base to 11.3 million, up 22% year-on-year.

Yet one of the trends in the quarter was Openreach broadband line losses of 196,000, with moderately higher competitor losses combined with a weaker overall broadband and new homes market.

Assessing performance in the quarter and looking ahead, BT Group chief executive Allison Kirkby said that while pleased with what she said was a sold quarter, there was much more to do to simplify BT Group and deliver for customers.

“We remain on track to deliver our financial outlook for this year and our cash flow inflection to c. £2bn in 2027 and c. £3bn by the end of the decade,” she said. “Openreach continues to build at pace and with even more efficiency, passing the milestones of five million connections and – just yesterday – 15 million premises built.

“In Consumer, the widespread availability of FTTP and 5G combined with our new EE propositions has contributed to an improved trend in our customer base, in what remains a very competitive market. In Business, we also saw improved trends, as we continue to modernise our portfolio and our operations towards a simpler business, delivering secure, cloud-based connectivity and communication services for all our customers.”

Commenting on the results, Luigi Bucci, associate vice-president and analyst at Moody’s Ratings, observed that despite the pace of Openreach’s full-fibre roll-out, broadband losses had accelerated to nearly 200,000 over the quarter, amid sustained competition from altnets, and a challenging broadband and new housing market.

“As the full-fibre roll-out advances, broadband losses should decelerate, but the risk of higher losses remains,” he noted. “This is because the first-mover competitive advantage of altnets will gradually phase out. We anticipate that competition will remain sustained, as altnets have expanded their full-fibre coverage across the country. Their focus is shifting from network expansion to customer acquisition in an effort to strengthen their business model.”