The last few weeks has seen numerous analysts offering their analysis of the state of the BT Group and we now have the second quarter results for 2014 for the group. The dirty word profit has got bigger with a 13% rise in profits to £690m (adjusted figure before tax) on group revenues of £4,383m which is 2% down on the same quarter last year.
"Our Consumer business continues to perform well thanks to the impact of BT Sport where Premier League audiences are up around 45 per cent on average. Fibre is also driving growth with one in three of our retail broadband customers enjoying super-fast speeds.
Our fibre footprint has increased to more than 21 million premises and will continue to grow. We continue to see strong demand across the market for the faster speeds that fibre offers.
Further improving customer service remains a priority and Openreach is recruiting an additional 500 engineers to help us better serve our customers. We have also launched a range of new cloud-based products and services aimed at the business market.Gavin Patterson, Chief Executive, BT Group
BT Consumer (aka BT Retail) has been at the centre of many online and offline debates around the spending on sports rights which in the quarter was £83m, but with BT Consumer managing to grab 48% of the net broadband additions in the quarter in the face of a competitive wholesale arena with increasingly attractive offers to consumers it suggests that betting on sports might be helping. BT Consumer added 203,000 fibre based broadband customers in the quarter to give them 73.5% of the connections connected by Openreach since the fibre roll-outs started. The TV sector grew by some 38,000 connections to give 1,045,000 customers on the BT TV platform. BT Sport also attracted a peak audience of 1.25m for the opening match between Manchester United and Swansea City.
Bundling of TV services is the driver of faster broadband in the consumer arena, driven forward by the vast array of devices families own that mean and the news that BT customers will soon be able to add a Netflix subscription to their BT bill will add to the breadth of appeal and may hammer another nail into the coffin of linear TV which in ten years may only exist for live TV events.
Openreach is the arm of the BT Group charged with maintaining the local loop and the ongoing roll-out of FTTC and FTTP continues with GEA-FTTC or GEA-FTTP available to some 21 million premises of which 16% have now ordered a connection and are connected. The last quarter saw some extra 570,000 premises gain the option to order a fibre based service in the 44 BDUK project areas. The revenue within Openreach which should in theory be rising due to demand for fibre based solutions was offset by the effects of regulation. Interestingly the idea that we are all abandoning our landlines for mobile services is not borne out as Openreach added some extra 106,000 lines in the quarter. Overall the UK broadband market is also still growing with 182,000 new connections, and some 344,000 new GEA fibre based services were connected to give a total of 3.4 million.
Fingers crossed as take-up of Openreach fibre based increases we will start to see clawback clauses for the 44 BDUK projects kicking in and maybe featuring in the impact on Openreach revenues. While out best estimate is that we might start to see commercial roll-out of G.FAST in 2018 after various trials, though we expect that a G.FAST roll-out will also feature more FTTP since for some areas the cost difference between the two technologies may be negliable. An awful lot hinges on how well the FTTH roll-out in York by CityFibre goes, if all the PR milestones are met by that project while remaining within budget and then other cities follow, the race to a much larger FTTH/P footprint in the UK will be truly underway. The measured and calculated approach by the BT Group will only change when profits and dividends are at risk. The irony of the start of a full fibre commercial race would be that the work to avoid a digital divide could be undone very quickly.