BT's high profits surprise investors

Telecoms giant BT surprised investors today with higher-than-expected profits driven by growth in demand for high-speed broadband services in Britain.

BT said its transformation from a traditional fixed-line operator accelerated in the three months to June 30, with “new wave” technology now accounting for 20% of revenues.

It also celebrated a second consecutive quarter of underlying revenues growth, up 1% to £4.57bn (€6.91bn) after turnover from services such as broadband and voice data technology rose 32% to £936m (€1.41bn).

Pre-tax profits for the three-month period were £434m (€657m) – higher than the £410m (€620m) forecast by analysts.

But a decline in demand for its UK fixed-line services meant this result was still 13% lower than a year ago when BT reported profits of £501m (€758m).

BT blamed a 6% fall in its traditional business on British regulatory intervention, competition, price cuts and measures to encourage people to sign up for broadband.

Rivals such as Carphone Warehouse have eaten into BT’s dominant 70% share of the UK fixed-line market with promotions such as free local calls.

BT is also facing a potential challenge from British regulator Ofcom, which is considering a break-up of the company as part of a strategic review of the telecoms sector.

Chief executive Ben Verwaayen said: “Whilst the environment remains challenging we are confident in our strategy to deliver long-term growth to shareholders.”

Net debt – which once hit £30bn (€45bn) – was lowered by 7% during the three months to £8.32bn (€12.59bn).