BT financials show Openreach has a 24% GEA product penetration rate
The quarters results to the end of June 2016 have been published by BT and for those comparing with previous quarters results they need to remember that the impact of the EE customer base has to be factored in.
"Fibre broadband is available to well over 25m premises and take-up remains strong. At a retail level, we performed well achieving a 79% share of broadband net adds in the quarter. We were pleased to renew our FA Cup rights during the quarter and we look forward to showing more games from the Premier League at a much better time slot, starting in two weeks. Our customers can also look forward to all the exclusive live action from the UEFA Champions League and UEFA Europa League once again this year.
Our investment plans remain central to our future and so we will be rolling out further fibre in the coming months, as well as 4G through the Emergency Services Network contract. Our aim is to make these services as universally available as we can, whilst also deploying a new generation of ultrafast broadband. Such investment requires regulatory clarity, particularly in these uncertain times.
Having listened to Ofcom and industry, we have set out our proposals for greater independence and transparency for Openreach. Our proposals can form the basis for a fair, proportionate and sustainable regulatory settlement and we believe they can also enable Ofcom to bring its Digital Communications Review to a speedier conclusion. We will continue to engage with Ofcom over the coming months."Gavin Patterson, Chief Executive
On the subject of Openreach once the consultation period of the Ofcom proposals for dealing with Openreach are over the regulator will make its final decision and the impression given by the head of Ofcom Sharon White is that it is more likely to impose its view on what needs to be done, rather than accept the BT Group proposals. What impact any changes have will depend a lot on the way the other broadband operators utilise the changes, if business continues as usual then probably no real change to investment plans, and with TalkTalk leading the running of an active campaign to create a ground swell of calls for a full sell-off it does not look as if the major competitors are ready to embrace the proposed options of more influence on Openreach and the PIA v2 product.
Openreach saw a further growth in the number of broadband connections, up 95,000 in the last quarter (compares to 149,000 in the same quarter a year ago), but crucially the number of net fibre (GEA-FTTC or GEA-FTTP) additions was 333,000 showing that the migration of exchange based services to the GEA range continues. Some 6.2 million premises are now on a GEA service which is 24% of the premises passed.
"Capital expenditure was £337m, down £65m or 16%. This was after gross grant funding of £39m (Q1 2015/16: £99m) directly related to our activity on the Broadband Delivery UK (BDUK) programme build in the quarter. This was offset by the deferral of £12m of the total grant funding (Q1 15/16: £100m). The funding deferral is a non-cash item in the quarter. We continue to expect gross capital expenditure in 2016/17 to be higher than in the previous year."Openreach capital expenditure
One result of regulation price changes was a £50m reduction in revenue, which the 33% growth in fibre broadband revenue mainly offset. In terms of performance there are some 60 metrics for performance mandated by Ofcom and the results state Openreach was ahead of the target for all of them and the annoying matter of engineers missing appointments has been reduced by a third in the quarter. On the BDUK projects the base case assumption for take-up remains at 33% and on the commercial investment in the ultrafast arena the started target is still 10 million G.fast and two million FTTP premises passed by the end of 2020. For the G.fast deployment we an analysis of the number of cabinets needed back in June 2016 and we have now plotted the two scenarios for where BT may deliver 10 million premises passed with G.fast at speeds of 100 Mbps and faster.
BT Consumer added 79,000 new retail customers in the quarter, a massive 79% of the total seen by Openreach and also added the lions share of the fibre additions at 181,000 connections. BT Consumer now has 47% of its customers on a fibre based product. One interesting claim is that the new BT Smart Hub is twice as fast over Wi-Fi compared to the Sky Q Hub when using them two rooms away - and while we presume this is actual testing rather than a theoretical result reports on our forums are a little more mixed but difficult to adjudicate as very little chatter about Sky Q Wi-Fi performance. The venture into the TV sector continues for BT Consumer where it now has some 1.6 million BT TV customers adding 59,000 in the last quarter.
The take-up rates for fibre once combined with Virgin Media means a total penetration rate of 37.7% for the UK and while there are a long tail of other fibre based providers our recent integration of their availability data into the UK superfast figures suggests the additional impact in terms of penetration may be worth another 0.2%. When we compare this reported figure of 37.7%-37.9% with the proportion of speed tests we are seeing 36 to 40% of tests at superfast speeds in June 2016. There is another 2 to 4% of tests that appear to be on a NGA based infrastructure but getting sub superfast speeds and so while the overall figure is higher than reported penetration the difference is easily explained by people doing speed tests to see if their newly upgraded service is performing as per the sales estimate.