Broadband demand boosts BT

BT shares gained 3% today after the telecoms giant said its revenues had increased on the back of higher demand for high-speed broadband services.

Analysts had expected the company to report that turnover had fallen by 2.5% in the first three months of the year, but learned instead that it had grown by 0.2%.

The improvement came from an acceleration in revenues from “new wave” technology which cushioned the impact of a decline in its traditional fixed-line business.

Turnover from services such as high-speed broadband access and voice data technology improved by 38% between January and March – faster than the 31% growth in the previous quarter.

This helped BT post a 10% increase in underlying pre-tax profits to £2.02bn (€3bn) for the year to March 31 and led shares to improve on a day when more than 90% of top-flight firms were losing ground.

Investec telecoms analyst Christian Maher said sales of “new wave” services were higher than expected and could lead to the market raising estimates of future revenues at BT.

According to Jim McCafferty, of stockbrokers Seymour Pierce, BT may be able to hit its target of signing up five million broadband customers three months earlier than schedule.

Annual turnover was flat at £18.52bn (€27.5bn) after stripping out the impact of a cut in termination rates – the price that mobile phone firms charge each other and landline operators for putting callers through to their customers.

Net debt – which once hit £30bn (€44.6bn) – was lowered by 12% during the year to £8.43bn (€12.5bn).

Chief executive Ben Verwaayen expected challenging conditions to continue this year but added: “The results from our new wave businesses show our strategy is working.”

Regulatory intervention, competition, price cuts and changes in technology contributed to turnover from its fixed-line business falling 5% during the year.

BT’s share of the consumer market declined by 2.9% during the year to 69% as rivals such as Carphone Warehouse launched fixed-line services.

Although its share of the business market fell by 3.6% over the past 12 months, BT said revenues were improving as corporate customers switched to the latest technology.

Contract wins with the NHS to provide information and communications technology (ICT) added £77m (€114.4m) to turnover in the first three months of 2004.

Customers with access to broadband provided by BT were now approaching 2.5 million and quarterly turnover from high-speed internet access more than doubled to £165m (€245.1m).

The importance of “new wave” services to future growth was underlined by a 23% share of turnover in the past quarter compared with 18% over the full year.

The roll-out of broadband nationwide is one of the arguments put forward against the potential break-up of BT, which has been placed at the heart of a strategic review of the telecoms sector by regulator Ofcom.

The separation of BT’s network infrastructure from its retail arm is among five “fundamental questions” to be considered by Ofcom – the new watchdog for the sector – by the autumn.

“We believe this process is more likely to be harmful rather than beneficial to BT,” said Mr McCafferty.

Shareholders are in line to receive a full-year dividend of 8.5p (12.6c) – up 31% on a year earlier.