BT Group financial results for Q2 2019/2020 published
The latest BT Group results for the quarter ending 30th September 2019 are now out and as usual we talk a look at the key points from the BT Consumer and Openreach areas.
BT delivered results in line with our expectations for the second quarter and first half of the year, and we remain on track to meet our outlook for the full year.
We’ve invested to strengthen our competitive position. We’ve accelerated our 5G and FTTP rollouts, introduced an enhanced range of product and service initiatives for both consumer and business segments, and announced price and technology commitments to deliver fair, predictable and competitive pricing for customers.
Openreach is significantly accelerating its pace of FTTP build and is now passing a home or business every 26 seconds. Openreach announced a further 29 locations in its build plan to reach 4m premises by March 2021, and we continue to make positive progress with Government and Ofcom on the enablers to stimulate further investment in full fibre.
We continue to make progress on the BT modernisation agenda, delivering over £1.1bn in annualised cost savings, and announcing locations in our Better Workplace Programme.Philip Jansen, Chief Executive
Revenue in the last quarter at £1.268 billion was down 2% which is attributed to several factors i.e. volume discounts on the FTTC services, regulated price reductions and increases in compensation as a result of the automatic compensation scheme for when service installs are late or faults last longer than 2 days.
Operating costs increased by 7% and given the push to building more FTTP and taking on more staff to actually complete the 4 million FTTP premises by end of March 2021 challenge this is to be expected, there is also increased business rates and pay inflation.
The numbers people want to know are:
- FTTC connections now at 12,854,000 an increase of 524,000 in the quarter
- Non fibre down to 7,859,000 a decrease of 544,000
- Fibre to the Premises number of connections at 404,000 up 52,000
- G.fast live connections is 51,000 up 15,000
The growth of FTTP and G.fast connection numbers is good news, but with the pace of the roll-outs the take-up of FTTP has actually slipped slightly from 23.2% to 22.3%. This is not because FTTP is becoming less popular but because of the shift in where FTTP is being deployed, i.e. in Fibre First areas where there is competition with Virgin Media and existing superfast VDSL2 services we have not reached the must have it nature. The different dynamics of where people buy Openreach FTTP and which tiers was something we covered earlier in October.
- Fibre to the Premises 1,810,000 premises up 296,000 premises in the quarter
- G.fast 2,417,000 premises up 251,000 premises in the quarter
An interesting comparison between the FTTC and FTTP services is possible if you look at the revenue generated by each customer in the quarter, for FTTC this is just £6.95/m and for FTTP it is £14.85/m. The FTTP is higher because of those customers who are buying the 160 and 330 Mbps tiers and while changes to the wholesale pricing may erode this extra revenue it is likely that while the number buying the new Gigabit tier will be be low (probably in the 1 to 2% region) they will balance this figure out. There are other factors at play though, as once you go FTTP business and home workers may drop a second phone line and move this to VoIP meaning the lose of some WLR revenue.
As usual when the results are published it is a chance to see how far behind we are on tracking the G.fast and FTTP roll-outs, so as of this morning our Openreach FTTP footprint stood at 1,652,387 premises and the G.fast footprint was 1,952,893 premises passed. The FTTP tracking is staying within our usual 6 to 8 weeks window but the G.fast has dropped back slightly, but we do have a list of larger exchange areas where we need to search for more live pods so should catch up and maybe break the 2 million mark.
One key part of the results that is a short line about the £5 billion for Rural Gigabit coverage, while whether this is to cover 10% or 20% of UK premises is something to be debated but where we fully agree with BT is that "We await further information on how the £5bn will be allocated". Unfortunately with the Brexit extension and uncertainty around which party or coalition will be in power after the 12th December General Election it seems likely that no concrete news will emerge in this area until Spring 2020.
The modern pattern of not mentioning customer numbers continues which usually hides flat or declining customer numbers. To some extent this is to be expected as there is a lot of competition in the retail arena and in terms of take-up of broadband we have likely hit a large plateau in overall customer numbers, the changes are around which technology people use.
What we do know is that 75.8% of customers are on a superfast service and 1.6% are on an ultrafast product. The use of the word superfast here we believe does include VDSL2 customers with connection speeds of below 24 Mbps, but what is less clear is whether the ultrafast figure is really FTTP or whether those buying the 40/10 and 80/20 FTTP products are counted in the superfast column.
The take-up of VDSL2 and FTTP is set to improve drastically once the plan to upgrade some 700,000 customers from ADSL/ADSL2+ to a 40/10 service at no cost happens. The part we will be keeping a close eye on is what will be the price charged once the new 12, 18 or 24 month contract ends.
The fixed line revenue and APRU of £38.50 per month, does indicate some 9.748 million fixed line customers, which will include EE and Plusnet customers. Looking at our last quarters speed test results for fixed line (ADSL/FTTC/FTTP) services BT Consumer customers formed 38.4% of the tests we saw in July, August and September 2019.