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BT Tops 9.28 Million UK Retail Broadband Subscribers as Consumer CEO Exits

Friday, July 28th, 2017 (7:56 am) - Score 3,246

After a chaotic start to the year BT has today published their latest report for Q2 2017 (calendar), which saw their retail broadband base reach a total of 9,286,000 subscribers (up by 19K vs 29K in Q1) and this includes 5.1 million “fibre broadband” (FTTC/P) users (up 170K vs 211K in Q1).

Internally BT Group is very much still dealing with the fallout from recent Ofcom fines, price hikes and Italian accounting scandals (see the previous Q1 2017 update), although since then they’ve also had to deal with threats of industrial action over changes to their “gold-plated” defined-benefits pension scheme (here) and problems with their Ryan Reynolds fronted TV adverts (here).

At least in other areas the second quarter has been kinder to BT. So far the operator has detailed the coverage of their 330Mbps G.fast broadband technology pilot (here), installed their first InLinkUK kiosks in London (here), demoed a future Fibre-to-the-Premise (FTTP/H) service that could offer speeds of 100Gbps (here), tested a new 1Gbps capable G.fast and FTTdp technology (here) and prepared a fix for G.INP on ECI based hybrid fibre FTTC lines (here).

On top of all that Openreach finally launched their consultation on the “potential benefits and costs of a large-scale FTTP [full fibre] deployment” (here), which with enough support from the industry and Ofcom could conceivably see the operator expand the reach of their 1Gbps broadband FTTP network to 10 million premises passed by around 2025 (the current target is 2 million by 2020).

Financial Highlights from BT’s Quarterly Report
* BT Groups’ quarterly revenue = £5,849m (down from £6,122m in Q1 2017 calendar)
* BT Group’s reported profits before tax = £418m (down from £440m)
* BT Group’s total net debt = £8,810m (down from £8,932m)
* BT Wholesale’s quarterly operating profit = £98m (down from £141m)
* Openreach’s quarterly operating profit = £271m (down from £340m)
* Openreach’s quarterly capital expenditure = £390m (down from £470m)

BT has also issued an update on their capital expenditure and clawback (gainshare) from the Government’s Broadband Delivery UK roll-out scheme (i.e. public investment returned by BT due to rising take-up in FTTC/P covered areas), which reveals that £465m (up from £446m last quarter) of public funding may potentially become available for reinvestment into further UK coverage of “fibre broadband” services.

Capital Expenditure and BDUK

Our base-case assumption for take-up in BDUK areas remains at 39% of total homes passed. Under the terms of the BDUK programme, we have a potential obligation to either re-invest or repay grant funding depending on factors including the level of customer take-up achieved. While we have recognised gross grant funding of £26m (Q1 2016/17: £39m) in line with network build in the quarter, we have also deferred £19m (Q1 2016/17: £12m) of the total grant funding to reflect higher take-up levels on a number of contracts. To date we have deferred £465m (Q1 2016/17: £270m).

Now let’s take a quick look at BT’s different divisions.

BT Consumer / Retail

BT is still the biggest retail broadband ISP in the United Kingdom and they continue to hold the largest single share of “fibre broadband” subscriptions on Openreach’s national UK network (details below), although growth has slowed a bit this year and that’s partly down to the FTTC based “fibre” market becoming more mature. Historically Q2 is often also negatively impacted by the Easter holidays, as well as students returning home for the summer (i.e. cancelling their contracts).

Meanwhile BT’s mobile base (EE) continues to bleed customers, although on the flip side their 4G subscribers have grown from 18.6 million last quarter to 19 million now. We should remind readers that EE’s geographic (landmass) 4G network coverage of the UK is now 83% (99%+ population coverage) and they had aimed to reach 92% by September 2017 but the pace of progress has slowed (we suspect they won’t hit 92% as planned).

The medium-term goal for landmass coverage was also 95% by the end of December 2020 but this may be delayed if the 92% isn’t hit on time, although EE told ISPreview.co.uk that there’s a faster roll-out under-way this summer so they might make faster progress by the next report. Elsewhere BT’s Pay TV base is still struggling to find good growth.

Broadband Subs TV Subs Mobile Subs + EE
Fibre Subs
Q2 2017 TOTAL
9,286,000 1,758,000 29,782,000 5,105,000
Subs Change (Q2) +19,000 +8,000 -130,000 +170,000
Q1 2017 TOTAL
9,276,000 1,747,000 30,036,000 4,935,000
Subs Change (Q1) +29,000 +11,000 -132,000 +211,000

Openreach & Wholesale

Openreach’s results reflect the wider market, at least in respect to BT’s national network infrastructure and those ISPs that buy services over it (i.e. the total broadband and “fibre” lines below combine customers from BT’s own service as well as many other ISPs that buy their lines from Openreach).

We should add that Openreach’s “fibre” network covers over 26.8 million UK premises, with 550,000 via “ultrafast” (FTTP/G.fast) and the majority using slower FTTC (VDSL2). More than 100,000 customers have now connected to their ultrafast broadband technologies, most of which reflect FTTP deployments (G.fast is still in the pilot phase).

Note: Unbundled (LLU) lines are mostly used by ISPs that have installed some of their own kit inside Openreach’s network in order to gain more control over their products and prices (e.g. TalkTalk and Sky Broadband). On this front fully unbundled (MPF) lines are more popular because they give ISPs the most control and flexibility to differentiate themselves.

Total UK Broadband Lines
Fully Unbundled MPF Lines
Shared Unbundled SMPF Lines
Fibre Lines (FTTC/P)
Q2 2017 TOTAL
20,425,000 9,049,000 1,203,000 8,134,000
Lines Change (Q2) +36,000 +2,000 +22,000 +437,000
Q1 2017 TOTAL
20,390,000 9,047,000 1,181,000 7,698,000
Lines Change (Q1) +82,000 +24,000 +37,000 +520,000

It’s worth noting the quarterly increase of +437,000 in new “fibre broadband” (FTTC/P) lines, which includes the +170,000 added via BT’s own ISP. The outcome means that BT’s rivals accounted for +267,000 of the total increase (down from +309K in the previous quarter but proportionally a strong increase).

Separately, BTWholesale delivered a total of just 887,000 external broadband lines for other ISPs, which is up by +1,000 in the quarter.

Gavin Patterson, CEO of BT Group, said:

“BT has delivered an encouraging performance in the first quarter of the year. We’ve made good progress in our key areas of strategic focus: deliver great customer experience, invest for growth, and transform our costs. In particular, I’d highlight the growth achieved by our consumer facing businesses, helped by mobile.

BT, with Openreach, is well placed to support the roll out of FTTP in the UK, and we’re consulting with Ofcom, Government and other communications providers to build the investment case to achieve this outcome.

Our new Consumer business will operate our three distinct brands; BT, EE and Plusnet; to leverage our position as the largest and only fully converged player in the market, spanning fixed and mobile networks, consumer products and services as well as content.

We will continue to simplify and streamline the business and rationalise our costs as demonstrated by our ongoing performance transformation programme. Our businesses are leaders in their core segments and as we drive the business forward I am confident in the outlook for our Company.”

The upheaval of recent months is something that BT may have to contend with for some time to come, although it’s worth remembering that they remain the largest telecoms and broadband provider in the market. Nevertheless it’s noted that there have also been a number of management changes at the top, which are apparently designed to “simplify [BT’s] operating model, strengthen accountabilities and accelerate its transformation.”

Marc Allera, currently CEO of the EE business, has been appointed to lead a newly created Consumer division (effective from 1st September 2017), which brings together BT’s Consumer and EE businesses. The new Consumer business will operate across three primary brands – BT, EE and Plusnet – and will span fixed and mobile networks, consumer products and services, and content.

As a result of that BT Consumer’s current CEO, John Petter, will be leaving the operator after 13 long years of service. BT has also announced the appointment of Cathryn Ross, currently CEO of Ofwat, will become its new Director of Regulatory Affairs (effective from January 2018). In keeping with that BT Group’s long-time Chief Strategy Officer, Sean Williams, will also be leaving the operator.

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Mark Jackson
By Mark Jackson
Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on Twitter, , Facebook and Linkedin.
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