BT Top 7.88M Internet Subs as Fibre Broadband Covers 24M UK Premises

BT has posted their latest Q3-2015 results (calendar), which reveals that their retail business now has a total of 7,879,000 broadband subscribers (up by +82K vs +83K in Q2) and 3,438,000 of those are taking their FTTC dominated BTInfinity “fibre broadband” (up by +212K in Q3 vs +217K in Q2).

The operator’s business is split into several divisions, one that serves end-users with BT’s own retail products (BT Consumer), another that manages the underlying UK telecoms network and sells related services to ISPs on a “functionally separate” basis from BT (Openreach) and one that sells BT’s own twist on their products to other ISPs (BT Wholesale).

At this point we normally expect BT’s own retail subscriber figures to be stronger in Q3 than Q2 because the second quarter tends to suffer due to a mix of holiday periods and students returning home for the summer (cancelled contracts). As such it’s a little surprising to see flat growth for the latest quarter, although the recent price hikes might be playing a part (here).

It’s also interesting to contrast the BT Consumer results with those from Openreach, which reflects uptake across the wider market (excluding Virgin Media and smaller alternative network providers).

Openreach reported that their total active UK broadband lines have now topped 19,615,000 (up by +160k in Q3 vs +149K in Q2 and +248K in Q1 2015), which includes 8,798,000 fully unbundled (MPF LLU) and 1,091,000 shared unbundled (SMPF LLU) lines as used by other ISPs (e.g. TalkTalk and Sky Broadband). BT’s rival ISPs tend to prefer the extra control and independence of MPF lines.

Elsewhere Openreach also reported that some 4,997,000 subscribers had now taken an FTTC/P “fibre broadband” service out of more than 24 million premises passed (more than 80% UK coverage), which is an increase of +415,000 subscribers in Q3 (up from the +389k in Q2 and down on the +455k added in Q1). BTInfinity’s own subscribers still dominate the total, but rivals are having a growing impact.

Separately BTWholesale continues to operate a total of 1,847,000 external broadband lines for other ISPs, which is up by just +5,000 in the quarter after showing another small increase of +11k in Q2 (during Q1 they saw a sudden shock decline of -42K).

Gavin Patterson, BT Group’s CEO, said:

“We’ve delivered a good financial performance with revenue up 2% this quarter.

Fibre broadband is a success story and we continue to invest heavily to help the UK remain a broadband leader among major European nations. Our open access fibre network now passes 24 million premises and we are not stopping there. We want to get fibre broadband to as many people as possible and we are also pushing ahead with our plans to get ultrafast broadband to ten million premises by the end of 2020. Market-wide demand for fibre remains strong with fibre net additions up 21% as we hit the five million milestone for homes and businesses connected.

We’ve seen good demand for BT Sport Europe and this has helped us add a record number of BT TV customers in the quarter. Its contribution has been better than we expected, helping drive a 7% increase in BT Consumer revenue. Mobile is another growth area and I am pleased our consumer customer base now stands at more than 200,000. And I am also pleased that yesterday, the Competition and Markets Authority provisionally approved our planned acquisition of EE, unconditionally without remedies.

We are making step changes to improve customer service, as part of our group-wide programme. Openreach’s recently launched ‘View my Engineer’ service is going down well. The 3,000 engineers we hired in the last 18 months are helping us fix faults faster and provide new services sooner. We have also created more than 1,000 new contact centre jobs in the UK, with hundreds more to come, to meet our 2016 commitment for more than 80% of consumer customer calls to be answered in the UK. And we have plans to go even further in years to come.”

Despite all this BT’s future after Q3 is still uncertain, not least because Ofcom are considering whether or not to completely separate the Openreach division (here) and then there’s the not insignificant matter of those proposals to give rivals more access to BT’s Dark Fibre network (here). On the flip side that £12.5bn merged with mobile giant EE looks set to go ahead (here).

BT has also attempted to combat Ofcom’s review with promises of a minimum 5-10Mbps universal UK broadband speed (USO) and a pledge to invest in ultrafast G.fast connectivity (here), but the outcome is as yet uncertain. A divorce of Openreach from BT could be a very long and difficult process, which is also making the Government sceptical (here) and that may count in their favour.

In the meantime we’ll pause for thought by taking a quick look at BT Group’s financials. Overall BT Group’s quarterly revenue reached £4,381m (up from £4,278m in Q2) and their reported profits before tax increased to £642m (up from £632m in Q1, but down sharply from £842m in Q1). Meanwhile total net debt for the group grew again to hit £5,919m, which is up from £5,819m in the previous quarter.

Finally, BTWholesale produced a quarterly operating profit of £72m, which is down on the £82m recorded for Q2 and the £121m for Q1. By comparison BTOpenreach produced a Q3 operating profit of £318m, which is up from £304m in Q2 but still down from £366m in Q1. It’s worth pointing out that Openreach’s quarterly capital expenditure has tended to hover just below the £300m mark, although Q3 saw a figure of £348m and Q2 before that had £402m.

As a side note, BT Consumer has now added 106,000 BT TV customers in Q3 (up from +60K in Q2) and that took their total customer base to 1.308 million. The operator also has more than 200,000 mobile subscribers.