BT upbeat after first-quarter rise

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BT Group on Thursday expressed confidence that it could continue to grow revenues and profit, as a second successive quarter of year-on-year growth in core earnings ensured that the telecoms group’s results were in line with expectations.

Core earnings for the first quarter of its 2007 fiscal year, which ended on June 30, rose 2 per cent to £1.4bn on revenues 3 per cent higher at £4.9bn.

Increasing revenues from “new wave” activities, such as broadband and private communications networks for companies, continue to offset the decline in sales from traditional services such as fixed-line voice calls.

The final quarter of 2006 was the first in 11 to show year-on-year growth in BT’s earnings before interest, tax, depreciation and amortisation, and prompted a bullish outlook from management for 2007.

Ben Verwaayen, BT’s chief executive, said on Thursday: “Our first-quarter results underpin our confidence in our ability to continue to grow our revenue, ebitda, earnings per share and dividends this year.”

Pre-tax profit before exceptional items rose 20 per cent to £615m for the quarter. Earnings per share before exceptionals rose 24 per cent to 5.6p.

However, Ian Livingston, head of BT Retail, the consumer business, admitted the broadband price war could result in “churn”, or lost customers. BT Retail’s market share of new customers taking broadband over digital subscriber lines slipped to 30 per cent at the end of the quarter, from 31 per cent at March 31.

Carphone Warehouse unleashed the broadband price war in April by offering “free” high speed internet access to people who signed up to its £21 a month fixed line phone service. Carphone on Thursday reported a 42 per cent hike in first quarter revenues and said its broadband deal had attracted 476,000 customers.

Mr Livingston said BT’s new broadband packages, unveiled in June, had “gone down very well”. “There is a lot of competition in the market place, and we will fight very hard,” he added.

BT Retail reported revenues of £2.1bn, down 2 per cent, and ebitda before staff leaving costs of £182m, up 15 per cent.

BT Global Services, which supplies private communications networks and related information technology to companies, reported revenues of £2.2bn, up 4 per cent, and ebitda before staff leaving costs of £228m, up 3 per cent. It secured contracts worth £1bn, including orders from Philips and Unilever.

The results suggested that the broadband price war might be having some impact on BT Retail, the consumer business. BT Retail said it had a 30 per cent market share of new broadband customers, up from 31 per cent in the last quarter of 2006.

Carphone Warehouse unleashed the broadband price war in April by offering “free” high speed internet access to people who signed up to its £21 a month fixed-line phone service. Carphone on Thursday reported a sharp rise in first quarter revenues as its new broadband offering continued to attract subscribers.

BT Retail reported revenues of £2.1bn, down 2 per cent, and ebitda before staff leaving costs of £182m, up 15 per cent.

BT Global Services, which supplies private communications networks and related information technology to companies, reported revenues of £2.2bn, up 4 per cent, and ebitda before staff leaving costs of £228m, up 3 per cent. It secured contracts worth £1bn, including orders from Philips and Unilever.

Revenues at BT Wholesale, which sells services to other telecoms companies, rose 2 per cent to £1.8bn, while Ebitda before staff leaving costs rose by a similar rate to £478m.

For the first time, BT detailed the financial performance of Openreach, the division that enables competitors to take control of the landlines that run from phone exchanges to people’s homes.

That process, known as local loop unbundling, is central to efforts by Ofcom, the regulator, to increase competition in the provision of broadband.

Openreach reported revenues of £1.3bn, down 3 per cent, and Ebitda before staff leaving costs of £472m, down 7 per cent. BT said the revenue decline was due to price cuts in products it sells to competitors, such as wholesale line rental.

BT said its defined benefit pension scheme had a deficit of £1.6bn at June 30 under international accounting rules, down £1.8bn from the same period a year ago.

The shares edged ½ p higher to 238p in afternoon London trading.

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