BT shares up 8% as profits rise

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BT expressed confidence on Thursday that it could deliver higher revenues and profits in 2007 after reporting its first rise in core quarterly earnings in almost three years.

The news drove the telecommunications group’s shares 8 per cent higher.

The results underlined how falling sales from BT’s fixed-line telephone services have been offset by increasing revenues from the provision of broadband and private communication networks. BT’s revenues rose 7 per cent to £5.13bn in the three months to March 31, and core profits before exceptionals and redundancies increased 1 per cent to £1.5bn.

For the first time since 2002, BT issued guidance on prospects. “Our performance underpins our confidence that we can continue to grow revenue, ebitda [earnings before interest, tax, depreciation and amortisation], earnings per share and dividends over the coming year,” it said.

BT’s traditional revenues, focused on fixed-line services, fell 3 per cent to £3.28bn in the last quarter of its 2006 financial year. But “new wave” revenues rose 28 per cent to £1.85bn. BT’s global services division, which supplies private networks and information technology to big companies, was the engine for growth, together with broadband. The group’s shares closed up 17 pence at 226.25 pence.

Ben Verwaayen, chief executive, said the results demonstrated BT was “firing on all cylinders”. He shrugged off the challenge to BT’s retail division from Carphone Warehouse, the mobile phone retailer that has unleashed a broadband price war. Carphone is offering “free” broadband if people pay £21 a month for a fixed-line phone deal. But Mr Verwaayen insisted consumers were influenced by more than price. He said BT’s retail division would be unveiling new services over the summer based around its wireless Fusion phone, which provides calls at fixed-line rates inside the home and uses Vodafone’s cellular network outside it.

BT also announced a deal with DreamWorks to show the Hollywood studio’s films on its TV via broadband service, which is due to be launched this autumn.

BT said its full year dividend for 2006 would be up 14 per cent to 11.9 pence per share. Revenues for 2006 rose 6 per cent to £19.51bn. Earnings per share before exceptionals rose 8 per cent to 19.5 pence. Profits before tax, after exceptionals, fell 13 per cent to £2.04bn.

Mike Cansfield, head of telecoms at Ovum, a consulting and research firm, said BT’s rising revenues contrasted with declining performances by its peers. But he said BT’s lack of a mobile business was “a significant inhibitor to how far the business can grow in the long term”.

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