BT nets strong profits - but regulators are still circling

Revenues slipped as the telco war rages on.

by Rachel Savage
Last Updated: 21 Aug 2015

After Sky scored with stellar results yesterday, all eyes turned to its bitter rival BT. The telecoms giant duly delivered healthy first quarter profits today, but revenues slipped as some parts of the sprawling business failed to dial in amid regulatory pressure.

Pre-tax profits climbed 16% to £632m, but sales fell 2% to £4.28bn in the quarter to June 30, slightly below analyst expectations. That sent shares down 2.3% to 462.4p in mid-morning trading, having risen more than 18% this year.

The biggest hit came from its global services business, which delivers large IT projects, where revenues fell 6% to £1.54bn. No doubt the pressure will once again ratchet up on uber-smooth chief exec Gavin Patterson, who faced calls to spin off the troubled unit last year.

But it was a different story in BT’s consumer business, the battlefield where it has been facing down Sky (and to a lesser extent TalkTalk and Vodafone). Sales there rose 3% to £1.07bn as billions of pounds of investment in mobile (ahead of its £12.5bn purchase of EE going through) and football TV rights started to pay off.

Patterson said BT’s re-entry into the mobile market (via a network deal with EE), 13 years after the dotcom bust sell-off of its first attempt, was off to a ‘good start’, with 100,000 new customers signed up in three months.

Meanwhile, it netted 60,000 new TV customers, the best quarterly score in nearly two years, ahead of its launch of the BT Sport Europe channel on August 1, which will host the coveted Champions League football.

But there is a long regulatory shadow being cast over the oldest telecoms company in the world. Firstly, its acquisition of EE is under scrutiny by the Competition and Markets Authority.

Secondly, Ofcom is deciding whether to force BT to spin out its broadband infrastructure division Openreach, after complaints from its competitors they are being discriminated against (anyone on a different network who has had to deal with a BT engineer may well agree). Patterson has more on his plate than just Rupert Murdoch and his merry men.

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