BT sees profits slide 30%
07 February 2008
BT sees profits slide 30%
UK incumbent BT reported on Thursday that profits for the quarter to end-December fell 30 per cent year on year to £447m.
Group revenues for the same period were flat at £5.1bn, with the company hit by restructuring costs and an 11 per cent drop in sales at the Wholesale division.
But while chief executive, Ben Verwaayen, called the results, "another solid performance," Ovum analyst, Mike Cansfield, said, "The answer to why we are disappointed is all in comparisons. If we look back 12 months, BT revenues increased in the comparable quarter by 5 per cent and profit before taxation and specific items increased by 13.1 per cent.
"The only conclusion that you can draw is that the growth in BTs performance is slowing," he said.
Global Services has been BTs star performer, posting a 6.3 per cent increase in revenues, while retail is continuing the gradual improvement trend with revenues increasing by 1.8 per cent and Openreach operating profit up 6.6 per cent .
However, Wholesale was hit by price reductions in broadband, LLU migration and a decline in low margin transit business.
"From this it would be easy to point the finger at Wholesale as BTs problem child, but to do so would be to miss the point. Twelve months ago the comparable Wholesale metrics were mostly positive (Operating profit was the exception), and in twelve months time most of the factors noted here will have passed through and performance is expected to have stabilised. So this is more a market adjustment rather than a trend," said Cansfield.
By way of turning the business around, BT has referred to three new products coming out of its 21CN initiative, Ethernet, Broadband Connect and converged Broadband voice, but the one that caught Ovum's eye is the Innovation Platform to enable BT, its partners and third party developers to create software applications on 21CN. "This type of collaborative approach to innovation is critical if BT is to grow the top line," said Cansfield.
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