BT seems to be providing more detail in the latest first quarter results in relation to the capital expenditure by Openreach. This is largely driven by the increasing popularity of the GEA-FTTC and GEA-FTTP services which with a BT Group declared 80% UK coverage at the end of June 2015 (on 28th July we made is 81.3%) and take-up that has now exceeded 20% the fibre wagon is starting to roll down the hill at ever faster rates.
"Capital expenditure was £402m, up £144m or 56%. This was after £99m (Q1 2014/15: £73m) of gross grant funding directly related to our fibre broadband network build in the quarter. This was offset by the deferral of £100m of the total grant funding we have accrued to date. This is primarily because we have increased our base-case assumption for take-up and under the terms of the BDUK programme, we have a potential obligation to either re-invest or repay grant funding depending on factors including the level of customer take-up achieved."Extract from Openreach results section
In the last quarter some 389,000 new fibre connections were activated (14% of 4.6m now with a GEA service) and now the UK is 20% of those passed. With BDUK contracts usually carrying a clause to allow for clawback of some public money at 20% take-up this is an important point for those making assumptions about how much the phase 1 BDUK process is costing.
The strong take-up is allowing BT to change its base case assumptions on take-up to 28% or 30% in BDUK areas, which will effectively shorten the expected payback period on the investment though it will still be a long time to pay off the FTTC roll-out.
The number of landlines shrunk in the last quarter by some 6,000 but since the increase in the last 12 months is 196,000 the evidence for people giving up on fixed line telecoms is weak. An extra 149,000 broadband connections (fibre or ADSL/ADSL2+) were made in the quarter increasing the UK overall broadband take-up too.
In terms of the service level performance of Openreach, apparently Openreach is already meeting the levels for 2015/2016 which are even more difficult than the 2014/2015 set. Of course meeting the required levels is no good for those falling outside the metrics and it is these edge cases that are fairly easy to find if you look hard enough on social media.
BT Consumer (Retail) remains the number one provider and with its commanding lead there is no sign of this changing and added 85,000 new customers in the quarter. The number of new fibre connections was 217,000 (a mixture of new customers and upgrades) which means 41% of BT Consumer customers are now on a fibre based connection (3.2 million).
BT TV grew by 60,000 customers to 1.2 million and BT Sport audience figures are growing (no exact figures other than viewing up by 51%) and the launch of the Ultra HD sports channel at £15 per month has the potential to drive the top-end of the market. BT Mobile in its first three months has added 100,000 customers.
The BT Wholesale section contains a hint as to why voice line rental may continue to rise each year in the face fairly flat wholesale line rental (and MPF line rental) and that is call revenue is declining over time. This will be a mixture of some people shifting to VoIP but for the great bulk of the UK population most likely their calling habits evolve to fit whatever fixed price call bundle they have on their line.