UK telco BT (BT.A) led the list of FTSE 100 gainers in morning trade on Thursday after announcing it had delivered on its cost-savings programme ahead of schedule, half year results beat expectations and the company vowed to win Britain’s fibre broadband wars.
Shares in BT rallied nearly 5% to 149p after it delivered second-quarter EBITDA (earnings before interest, tax, depreciation and amortisation) of £1.88 billion on £5.24 billion revenue.
The £15.5 billion company also confirmed its outlook for the current and full year to March 2023 after it reported a 3% fall in first half revenue and a 1% rise in underlying profits for the first six months. The group reiterated its previous guidance for EBITDA of £7.5 billion to £7.7 billion for the current year and above £7.9 billion for full-year 2023. Revenue for the current full year is expected to be broadly flat.
BT also confirmed that it has pulled off its £1 billion of gross annualised cost savings 18 months ahead of the March 2023 target it had set itself, implying that full year March 2025’s £2 billion savings aim will be pulled forward by a year with further savings coming through in 2025.
CAMPAIGN TO RETAIN INDEPENDENCE
BT also vowed victory in the battle for full fibre broadband expansion to most UK homes and businesses on Thursday, saying lower costs and strong demand would underpin returns to investors, a clear attempt to woo shareholders in its effort to keep a circling shareholder at bay.
The company, which is strengthening its defences against a possible takeover by European telecoms player Patrick Drahi, said its full-fibre network covered six million premises, more than all its rivals combined, and it had lowered the cost of the build by 15%.
Chief Executive Philip Jansen said such was the momentum that BT had decided to fund the full expansion of fibre to 25 million premises by 2026 itself after it had explored bringing in a partner. The BT boss also promised substantial free cash flow to bolster shareholder returns once the company passed the peak of its build.
FREE CASH PROMISES
That will slash ‘at least £1 billion’ off capital expenditure and save £500 million off operating costs, Jansen said, increasing free cash flow by at least £1.5 billion by the end of the decade, cash funds that could be in part be channelled into higher dividends and larger share buybacks down the line.
Already the UK’s biggest broadband and mobile operator, BT faces competition in a fierce fibre race, with rival Virgin Media O2 planning to upgrade its entire 15.5 million premises network to by 2028. Virgin Media O2 is also talking to broadband providers about moving onto its network as wholesale customers.
Jansen said BT had signed up 10 providers, including TalkTalk and Sky, to its long-term FTTP pricing offer, or fibre to the premises.
Whether this will be enough to keep investors on side for the long haul remains to be seen, however. BT shares have risen 12.5% this year after today’s bump, yet the stock has fallen from highs of 450p over the past six years.
