Modernisation and cost saving programme helps BT steady the ship

The UK’s largest fixed line and mobile operator has reported improved half year performance and raised its full year outlook.

Wei Shi

October 29, 2020

3 Min Read
Modernisation and cost saving programme helps BT steady the ship

The UK’s largest fixed line and mobile operator has reported improved half year performance and raised its full year outlook.

BT reported its half year (to 30 September) and Q3 (Q2 in its financial year) results with reasonably reassuring performance. The half year revenue of £10.6 billion ($13.7 billion) was 8% down from a year ago, which the company attributed to “the impact of Covid-19 including reduced BT Sport revenue and a reduction in business activity in our enterprise units.”

Operating profit was down by 20% to £1.1 billion, with an operating margin of 10%. EBITDA was down by 5% to reach £3.7 billion. EBITDA margin therefore improved by 1-percentage point from 34% a year ago to 35%. As a result, the company has raised the lower end of the range of its expected EBITDA for the whole year from £7.2 billion to £7.3 billion and believed it could further improve in the following years, with EBITDA for 2022/23 financial year expected to reach “at least £7.9 billion”.

“We continue to invest to make BT more competitive and I’m pleased to see the quality of our products and services improving,” Philip Jansen, BT’s Chief Executive, said in the statement.

Highlights of the half-year operation included Openreach connecting fibre to 40,000 premises per week while its FTTP customer based growing by 62% to reach 655k, all four major broadband providers using Openreach network selling FTTP now, and EE’s 5G service reaching 112 cities and towns, “more than any other operator”, BT proudly announced.

BT attributed the improved business performance to its modernisation and cost saving programme started earlier in the year, which mainly focused on “simplifying our product portfolio, simplifying and automating our customer journeys, moving to a modern, modular IT architecture, and migrating customers from our legacy networks to our modern FTTP and 5G networks.” The company also said it was ahead of schedule with its cost saving achievement, reporting a £352m in cost savings in the first half of the year, against the targets of gross cost savings of £1 billion per annum by March 2023 and £2 billion per annum by March 2025.

When the modernisation and cost saving programme started BT’s board decided suspend dividend pay-out for the current financial year. With its EBITDA position improving, the board planned to reinstate dividend in the next financial year.

It’s not all tailwind though. With the end of the Brexit transition period coming to an end on 31 December, especially with the prospect of a “No Deal” severance getting higher, BT, as other British firms concerned, is faced with some uncertainty. The company is building its contingency plan to ensure it can “continue to provide uninterrupted service to our customers, including sufficient inventory to protect against potential import delays. We are also making the necessary changes to our contracts and processes so that we will continue to be able to transfer customer data to and from the EU.”

The company has also had to budget for “a final purchase of necessary Huawei equipment, including spares, prior to the ban on purchasing new Huawei 5G kit from 31 December 2020,” it said in the result release.

About the Author

Wei Shi

Wei leads the Telecoms.com Intelligence function. His responsibilities include managing and producing premium content for Telecoms.com Intelligence, undertaking special projects, and supporting internal and external partners. Wei’s research and writing have followed the heartbeat of the telecoms industry. His recent long form publications cover topics ranging from 5G and beyond, edge computing, and digital transformation, to artificial intelligence, telco cloud, and 5G devices. Wei also regularly contributes to the Telecoms.com news site and other group titles when he puts on his technology journalist hat. Wei has two decades’ experience in the telecoms ecosystem in Asia and Europe, both on the corporate side and on the professional service side. His former employers include Nokia and Strategy Analytics. Wei is a graduate of The London School of Economics. He speaks English, French, and Chinese, and has a working knowledge of Finnish and German. He is based in Telecom.com’s London office.

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