BT Group results see dividend suspended
The need to invest heavily in a full fibre roll-out appears to have finally being gripped firmly by BT Group, hence the 20 million premises target reported earlier today. Also while the telecoms market is in a relatively good place during the COVID-19 crisis since it has millions are continuing to work from home and others are staying in touch with families as the wider economy shrinks the financial pressure will grow on operators as revenue from consumers and business may shrink. There in light of these two issues it seems to make perfect sense to suspend the dividend payouts for the last quarter and subsequent quarters for the 2020/2021 financial year.
No dividend payout is not likely to be popular with some shareholders, but for those looking at longer terms of 10 years the picture will be very different as they will understand the possibility for efficiency savings and once the economy is back on its feet after the COVID-19 crisis the potential for upsell from entry level speeds should mean increasing revenue per customer.
"BT had a positive year delivering results in line with expectations and completing our £1.6bn phase 1 transformation programme, one year ahead of schedule.
Covid-19 has changed everybody’s world and I am immensely proud of how BT has responded to the challenges the Covid-19 crisis has presented. Our strong and resilient networks, both fixed and mobile, have proved critical to the continuing functioning of the UK economy, providing unrivalled connectivity and services for the nation.
Of course, Covid-19 is affecting our business, but the full impact will only become clearer as the economic consequences unfold over the next 12 months. Due to Covid-19, BT is not providing guidance for 2020/21, at this time.
BT is delivering, but is also changing. BT needs to be leaner, simpler and more agile. Today we are announcing a radical modernisation and simplification programme that will use technology to create a better BT for the future. This 5-year initiative will re-engineer old and out of date processes, rationalise products, reduce re-work and switch off many legacy services. This next stage in the modernisation of BT will deliver gross annualised savings of £2 billion over the next 5 years.
In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP and 5G, and to fund the major 5-year modernisation programme, we have also taken the difficult decision to suspend the dividend until 2022 and re-base thereafter.
These decisions, particularly on the dividend, network investment and transformation are key to underpinning BT’s investment case; driving network strength, competitive strength and financial strength, providing more clarity to the market, and driving long-term value for shareholders. I am confident that these decisions position us really positively for the future.Philip Jansen, Chief Executive on results for year ending 31st March 2020
On Openreach specifically the 2,575,000 FTTP premises passed has 524,000 actual connections (20.3% takeup) and G.fast network which is larger at 2,814,000 premises passed only has 80,000 connections (2.8% takeup). As we have covered before this is as much a function of those with G.fast access will already invariably have VDSL2 with speeds of over 60 Mbps, so at this time only those with an absolute need for speed that cannot be satisfied elsewhere are jumping on board. The FTTP figures which include new build where FTTP is the only option, or rural FTTP where slow ADSL/ADSL2+ is the only other option will always have much higher take-up.
The results indicate Openreach consider they have delivered FTTP in terms of premises passed to all the premises there were able to access in Salisbury. This means the withdrawal of copper services is set to start in December 2020. Our tracking which for Salisbury has not been updated for four weeks has the exchange at 84% full fibre coverage, with all the Fibre First, Fibre Villages, gap funded and other areas to look at we will have an updated figure for Salisbury later in May.
On BT Consumer the suprising figure is that 30% of BT customers are taking a Halo product, i.e. converged mobile and broadband service. The BT 500 and BT 900 products have been launched and are proving popular - though this may be pent up demand from. The results indicate that the range of speeds is considered to be 900, 500, 145, 80 and 40 for the FTTP products so it does look like the old 330 Mbps service is now considered legacy being replaced by the 500 Mbps tier.
No update on how many of the upgrades from ADSL/ADSL2+ to FTTC or FTTP depending on what is available have been done, but this is apparently on schedule to complete by late summer 2020 at which point we would obviously expect to see very few ADSL/ADSL2+ speed tests from BT Consumer customers once the 700,000 connection upgrade is complete.
In the consumer division the results show that ultrafast take-up has gone from 0.8% a year ago to 2.4% today and superfast take-up is also increasing (remember the upgrade plan above as well as people self-upgrading) up from 72.9% to 79.7% today.
Now time for a bit of data we have based on what we saw from BT Consumer speed tests in Q1 2020 (this data excludes EE and Plusnet speed tests).
Product popularity based on speed test observations in order of decreasing popularity:
- BT Superfast 1 FTTC/VDSL2 40/10 and 55/10 43.1% of tests
- BT Superfast 2 FTTC/VDSL2 80/20 28.4% of tests
- BT ADSL/ADSL2+ 23% of tests
- BT Superfast 1 FTTP 40/10 and 55/10 3% of tests
- BT Ultrafast 1 FTTP 145 Mbps 2.7% of tests
- BT Superfast 2 FTTP 80/20 2.5% of tests
- BT Ultrafast 2 FTTP 330 Mbps 1.9% of tests
- BT Ultrafast 1 & 2 G.fast 0.7% of tests
- BT 500 FTTP 0.3% of tests
- BT 900 FTTP 0.2% of tests
Our overall ultrafast service takeup sits at 5.8% which is higher than the 2.4% declared in the results. Some of this difference will be down to EE and Plusnet customers (i.e. around 1.8 to 2 million broadband customers) which we believe are in the BT Consumer figure of 2.4%, other considerations the crowd sourced nature of speed tests and tendency to speed test a new service compared to a service that is otherwise running fine this is not that surprising.
The key figure to keep an eye on in the next couple of quarters results is the ADSL/ADSL2+ figure which we are expecting to reduce to something around the 5% mark once their upgrade programme is complete.
The profile charts for the speed tests for BT Consumer customers in April 2020 shows the spread of speeds graphically and unlike Virgin Media which has been able to lever free speed upgrades to boost there average to close to 100 Mbps the ADSL/ADSL2+ upgrade programme is not going to have anything like the same effect. In short Virgin Media is going to command speed charts for some time.
An interesting time will be when the Salisbury copper switch off takes place and people are moving onto the full fibre network, some providers including BT Consumer may tease people onto the higher speed tiers, or the public may take the opportunity to try the faster services, so long as the price is right.