In the last few years, the barriers between the different sectors of the telecoms industry have broken down. Squeezed by intense price competition, businesses like BT and Sky have expanded out of their traditional strongholds and started invading each other’s territories.
The idea is to achieve ‘quad play’, which is something like nirvana for telecoms executives, only more profitable. It means being able to offer customers bundles of broadband, landline, mobile and TV, making it more hassle to switch and thereby allowing margins to increase.
BT appears to be leading the pack. Pre-tax profits at the FTSE 100 company rose 14% to £2.6bn in the year to March 31st. This is despite revenues falling 2% to £17.9bn, with the strong pound in 2014 weighing on its long suffering IT outsourcing division, Global Services. Revenues there fell 7%.
Results were stronger in consumer broadband and TV. Over the year, 455,000 people signed up to BT’s fibre broadband. Over half of these were already BT customers (quad play for the win), with a net increase of 121,000 as fickle customers switched sides. This helped revenues in BT’s consumer division rise 7% over the year.
‘Our superfast broadband network now passes more than three-quarters of the UK and we've announced plans to upgrade to ultrafast,’ said boss and MT cover star Gavin Patterson. What next, mega-ultra-hyperfast?
BT maintains the UK’s broadband network, called Openreach, which it supplies wholesale to rivals. Revenues in this division fell 11% over the year, and the company is still waiting to see whether regulator Ofcom will back calls from Sky, TalkTalk and others to spin it off on competition grounds.
It’s also waiting to hear whether the Competition and Markets Authority will allow its £12.5bn takeover of EE, which will propel BT back into the mobile business. If and when that it finally approved, BT will be true quad player.
Clearly, it’s the leader in broadband and landlines, but as EE is the largest individual mobile provider (the combined Three-O2 is larger), it will be at or near the top in three categories. As for the fourth, BT has aggressively pursued TV market share by going after headline sports rights.
In February, it paid £960m for Premier League rights over the next three seasons. So far, 5.2 million customers have signed up to BT Sport, leaving BT a significant player in pay TV, albeit a long way behind Sky, which also has rights to the Premier League.
Looking ahead from what he calls a ‘ground-breaking’ year, Patterson predicted revenues will return to growth next year. Investors were nonplussed though. Shares fell 0.9% to 450p on the news.
