'Fired-up' BT shares rise 8%

BT soared in value today as it revealed it was winning more high-tech business to offset falling revenues in traditional fixed-line telephony.

The group offered a much-needed boost for the beleaguered London market, rising by more than 8% after chief executive Ben Verwaayen said BT was “firing on all cylinders” with its best quarter for earnings in three years.

Revenues from “new wave” services such as broadband and IT networks for large corporate customers grew 38% to £6.3bn (€9.3bn) in the year to March 31 and now represent almost one third of all its business.

In contrast, revenues from traditional operations were down 5% in the same period.

Mr Verwaayen said: “BT has changed very significantly from four years ago, and the transformation is accelerating.”

He added that BT had not seen any slackening in demand since Carphone Warehouse stoked up an already competitive broadband market last month with its offer of free high-speed internet for customers who sign up to its phone package.

BT’s retail arm claimed a 31% share of new broadband sales in the fourth quarter, while its wholesale lines now carry almost eight million connections.

The group also revealed a major boost to its plans for a television-via-broadband service, which it expects to launch in the autumn.

BT said it had signed an agreement with DreamWorks for films to be included in the video-on-demand part of BT Vision, which will provide customers with Freeview channels and interactive services but with no compulsory subscription.

In a further boost, BT said it pensions deficit had halved in the past year to stand at £1.8bn (€2.7bn) by March 31.

That also excited investors today as the deficit reduction could encourage those private equity firms thought to be mulling a takeover approach.

Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers, said: “While applauding today’s results, the true test of BT still lies ahead – the introduction of free broadband via Carphone Warehouse and the successful roll-out of its TV-on-demand services are big hurdles yet to be overcome.”

Profits in the year to March 31 rose 5% to £2.18bn (€321.5bn), while fourth quarter earnings increased by 1% to £1.5bn (€2.2bn) – the first rise for 11 quarters.

Mr Verwaayen told investors: “This quarter’s results are a terrific set of numbers. They show BT firing on all cylinders, with underlying earnings, revenues and earnings per share all growing.

BT shareholders will receive a full-year dividend of 11.9p a share, an increase of 14% on a year earlier.