BT mulls options for Global as it refocuses on UK

BT looks likely to offload its global operations, which appear to have dragged down headline financials in the most recent full year, although overall the UK incumbent turned in a decent performance.

Mary Lennighan

May 16, 2024

3 Min Read

"As we move into the next phase of BT Group's transformation, we are sharpening our focus to be better for our customers and the country, by accelerating the modernisation of our operations, and by exploring options to optimise our global business," said Allison Kirkby, who took on the CEO role at BT earlier this year.

"This will create a simpler BT Group, fully focused on connecting the UK, and well positioned to generate significant growth for all our stakeholders," Kirkby said.

The telco did not have a lot to add with regard to its perennially problematic global ops, but made it clear that its strategy going forward is to concentrate on the UK and naturally the Global business sits outside of that. However, it insisted that Global's prospects have revived of late, and it still sees opportunities in the multi-cloud market, highlighting its recently-launched Global Fabric network-as-a-service (NaaS) offer. Partnerships for the business are an option, it said, but clearly any success it achieves with Global Fabric would also help to boost a purchase price.

BT no longer splits out figures for the Global unit, which now sits inside its Business division. Business, which accounts for just under 40% of group turnover posted a revenue decline of 2% in the year to the end of March to £8.1 billion, compounded by a 5% slide in the fourth quarter. Earnings were down by 16% in the full year.

BT attributed the division's performance to higher input costs, legacy declines and one-off in the previous year, which were only partly offset by cost-cutting and growth in SMB and security operations. It wrote down the value of the Business unit by £488 million, citing a decline in profitability in recent years.

That impairment charge, along with increased pension interest costs, drove a 31% decline in group pretax profit to 1.2 billion for the full year.

BT's Consumer arm performed better, revenues growing by 4% to £9.8 billion and EBITDA by 5%, while its third division, Openreach, posted 7% revenue growth and an increase of 9% in EBITDA. As such, at group level BT saw its top line inch up by 2% and earnings by 1%, which, according to a note from analysts at Hargreave Lansdown on Thursday, was "broadly in line with expectations."

The firm also pointed to strong free cash flow guidance, which "helps keep markets happy." Indeed, BT's share price was up by more than 11% at the time of writing.

The telco's normalised free cash flow fell by 4% to £1.3 billion, which was actually ahead of guidance, BT said. As such, it is now shooting for FCF of £1.5 billion in the current financial year, rising to £2 billion in fiscal 2027 and £3 billion by the end of the decade.

"This enhanced cash flow allows us to increase our dividend for FY24 by 3.9% to 8.0 pence per share," Kirkby said, giving shareholders something else to smile about. "We're also setting a further £3 billion of gross annualised cost savings to be reached by the end of FY29."

Operationally, BT focused heavily on its fibre build. Openreach built out fibre to 1 million premises in the fourth quarter, taking its total to 13.8 million. That build rate of 78,000 per week puts it on track to reach 25 million premises by December 2026, it said. Uptake is also increasing. The firm reported net adds of 397,000 in Q4, via its retail partners, taking total connections to 4.8 million, or 34% take-up.

Overall, Openreach's broadband base declined by almost half a million lines – 491,000, to be precise – due to overall market weakness that could continue in the current year. But ARPU was up by 10% year-on-year to £15.1, due to price rises and fibre growth.

BT said it is past peak capex for its full fibre build, which is more good news for investors.

The telco is still working on its transformation plan, but full-year 2024 looks like a step in the right direction. All eyes will now be on BT's Global business and what it decides to do with that as it repositions itself as a fully UK-focused outfit.

About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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