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BT See Rise in Ultrafast Broadband Cover to 3.7 Million UK Premises

Friday, August 2nd, 2019 (7:47 am) - Score 4,382
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BT Group has today published their latest results to the end of June 2019 (Q1 19/20 financial), which reveals that Openreach’s FTTP and G.fast based “ultrafast broadband” (100Mbps+) ISP networks have grown their coverage to 1.51 million and 2.16 million UK premises respectively (overall total of 3.7m, up from 3.2m last quarter).

Since the last results BT and its siblings have made a lot of announcements. We’ll try to keep this short by focusing upon only the biggest developments, which started with our leak of Openreach’s plan to trial symmetric speed 1Gbps FTTP services (here) and they’re also about to cut their wholesale prices, which will include new 500Mbps and 1Gbps packages for consumers (here).

Elsewhere BT is set to move their London HQ (here), launched 5G mobile via EE and could cut their dividend in order to help fund the FTTP rollout to 15 million premises by around 2025 (here). Ofcom also found that BT had made good progress on their legal separation from Openreach but they still want to see more details on their full fibre rollout plan (here). We also note that Ofcom are probing BT’s Excess Construction Charges (here).

Meanwhile Openreach has revised their G.fast/FTTC install options (here), appear to be pondering a plan to replace some of their ECI street cabinets with Huawei (here), have tweaked the minimum selling speed for G.fast lines from 100Mbps to 120Mbps – impacting coverage (here) – and have set out their plans to trial an FTTP exchange upgrade process as part of the move to retire copper services (here).

Now on to BT’s results..

Financial Highlights – BT’s Quarterly Change
* BT Group revenue = £5,633m (down from £5,853m)
* BT Group profit after tax = £505m (down from £513m)
* BT Group total net debt = -£17,805m (from -£11,035m)

NOTE: Net debt was £17,805m at 30 June 2019, £6,770m higher than at 31st March 2019, primarily reflecting recognition of lease liabilities on transition to IFRS 16 on 1st April 2019. Excluding the IFRS 16 lease liability, net financial debt was £11,642m, £607m higher than at 31st March 2019. This increase was driven by the £1,250m pension deficit payments made this quarter, partly offset by operating cash flows.

We should add that BT’s assumptions about clawback / gainshare via the government’s Broadband Delivery UK roll-out programme remains unchanged (i.e. public money that can be returned and reinvested by local authorities to help “superfast broadband” coverage to reach around 98% of the UK by the end of 2020).

The operator’s previous “life-time view” of their BDUK linked contracts, which predicted that take-up of their FTTC/P network within related areas could eventually reach 61%, suggested that up to around £712m of public investment might eventually be returned for the above purpose (currently £667m).

BT Group’s Capital expenditure

Capital expenditure was £931m (2018/19: £839m), including network investment of £494m, up 15%. This includes £16m grant funding deferral under the Broadband Delivery UK (BDUK) programme, excluding the effect of this deferral, capital expenditure was £915m. The remaining increase in network investment reflects higher investment in 5G and our Fibre Cities programme, partially offset by lower spend on the Emergency Services Network (ESN).

Our BDUK Gainshare provision at the end of the quarter was £667m. Other capital expenditure components were up 6% with £236m spent on customer driven investments, £169m on systems and IT, and £32m spent on non-network infrastructure.

Sadly BT no longer provide customer figures for their own retail broadband ISP (likely covering up for declines), although it’s noted that 74.3% of their consumer broadband base now take a “superfast broadband” connection (up from 72.9% last quarter – mostly via FTTC) and this drops to just 1.1% (up from 0.8% last quarter) for their “ultrafast broadband” products. Remember, the latter have limited coverage and are fairly new.

Openreach’s Network Coverage

The table below offers a useful breakdown of fixed line network coverage and take-up by technology, which covers the totals for all ISPs on their national UK network combined (e.g. BT, Sky Broadband, TalkTalk, Zen Internet, Vodafone etc.). Overall the main takeaway from this is that their rollout of “full fibre” (FTTP) lines is now clearly the dominant deployment among their two “ultrafast broadband” technologies, with G.fast continuing to slow.

However it’s unclear whether the G.fast premises passed figures have been updated yet to reflect the recent change in minimum selling speed from 100Mbps to 120Mbps (here), which would surely reduce its availability to consumers. The G.fast rollout was already slowing in favour of FTTP but this could certainly have contributed to this quarters even slower progress.

openreach q1 2019/20 network coverage and takeup

We note that take-up of FTTP is 23.25% (down from 24.54% last quarter and 29.9% before that), while G.fast stands at 1.66% (up from 1.24% last quarter). However we would strongly caution readers not to misinterpret these change because such figures don’t tell the whole story.

At present both technologies are in their primary roll-out phases and take-up is a dynamically scaled measurement (impacted by the many different factors of consumer choice and awareness). This simply means that at certain stages of the rollout the figure for take-up may go up or even down, depending upon the pace of deployment.

We expect the overall take-up % for FTTP to fall as Openreach’s roll-out pace increases, not least because a big chunk of related lines were built well before the new “Fibre First” strategy began last year and this gave take-up a chance to grow. Balancing against this is the fact that FTTP is a more familiar and attractive product for consumers, while a lot of it is being deployed to new builds and BDUK areas (i.e. better for take-up).

On the flip side G.fast may have rising take-up but its deployment pace has slowed due to the re-focus toward FTTP. Equally G.fast has also suffered due to limited adoption by ISPs (e.g. Sky Broadband has yet to offer any ultrafast packages) and those that do offer such products don’t put much effort into advertising it (big commercial comparison sites ignore these). G.fast often also finds itself fighting against better plans from Virgin Media.

As usual our own ISP Listings page has been displaying both ultrafast broadband products for a long time because we don’t force ISPs to pay a commission in order to be shown, like big commercial comparison sites do.

Philip Jansen, CEO of BT Group, said:

“BT delivered results in line with our expectations for the quarter, with adjusted EBITDA declines in Consumer and Enterprise partly offset by growth in Global. We are on track to meet our outlook for the full year.

We made good progress during the quarter, including launching the UK’s first 5G network, delivering an improvement to our group net promoter score for the twelfth consecutive quarter, announcing the first nine cities in our consolidated office footprint, and being named the major broadband universal service obligation provider for the UK.

In building a better BT for the future we need to be even more competitive. We will continue to take decisive action, including on price, to further strengthen our customer propositions and market position, both to respond to any short-term market pressures and to capitalise on longer-term opportunities.

On network investment, we welcome the Government’s ambition for full fibre broadband across the country and we are confident we will see further steps to stimulate investment. We are ready to play our part to accelerate the pace of rollout, in a manner that will benefit both the country and our shareholders, and we are engaging with the Government and Ofcom on this.”

We also noted a few other bits of interesting news in BT’s results. Firstly, the operator confirmed that it would deliver most of next year’s 10Mbps+ Universal Service Obligation (USO) for broadband by using 4G based wireless connections and they added that 40,000 premises would be reached by fixed line broadband (FTTC/P).

Separately BT’s Enterprise (business) division claims to have “launched new fibre and digital phone line bundles” that are based on Openreach’s all-IP SOGEA capability, which is not something we’ve covered before but that would mark the first official ISP use of their new standalone broadband technology.

Meanwhile Openreach said they were now ahead on all of Ofcom’s 42 copper and fibre quality of service targets.

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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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18 Responses
  1. Avatar NGA for all

    The dichotomy of a now £667m Gainshare allowance, and planning to largely self fund (with cost recovery) a 4G B-USO service is a bit weird.

    It would healthy if BT reported how much of the reduction in the CD was invested in the Network by LDP and how much was returned as cash payments.

    At a Group level they will not care as the £667m is capitalised and added to the WLA cost stack. At an Openreach level they should at least be given the opportunity to outline to GOV/LDB how far (and how long it would take) this money could go in rural if actually put into stretching the build.

    This is an aspect where Ofcom’s separation, or BT group ‘accounting treatments’ not working for Openreach or the customer.

    • Avatar CarlT

      Openreach don’t want to spend the resources in terms of manpower, etc, on a large-scale gap-funded rural FTTP deployment. They are busy with Fibre First in urban areas.

      It would be remiss of them to conduct some kind of survey into it. They plan on largely achieving their aims via 4G which would not involve Openreach directly but another part of the group – Openreach would supply backhaul only.

      It looks as though 4G will be doing much of the work with Openreach doing some fixed-line build, likely only where necessary and more economical than 4G.

      Openreach could spend their 3-400 quid per home passed building in urban areas and passing 30,000 premises a week, or they could spend it topped up by public funds passing 1/10th of that. Guess which they’re most likely to do?

    • Avatar GNewton

      “Openreach could spend their 3-400 quid per home passed building in urban areas and passing 30,000 premises a week, or they could spend it topped up by public funds passing 1/10th of that”

      It’s not that simple. You also need to take into account the likely takeup figures of new fibre. And in the case of urban areas, there is also competition from other network providers like VM, CityFibre etc. It might be a lower £300 FTTP deployment cost per premise in urban areas, but possibly with a much lower ROI because of lower takeup rates.

    • Avatar NGA for all

      CarlT, I have not seen the take-up estimates for when OR overbuilds commercial FTTC with FTTP and thus impact of FTTP on the commercial FTTC footprint. The decisions can be reversed or pace slowed down.

      Upgrading rural using subsidies where take up is proven suggests it could be planned at c£100m a year of subsides. There is a win win possible the only problem occurs if you game it and treat the subsidies as an end in themselves.

  2. Avatar A_Builder

    Hmmme

    The thorny bit is always premises passed vs premises connected.

    In the old FTTP rollouts to new builds etc it was pretty much connected everywhere.

    The Alt Nets (Community Fibre, Hyperoptic etc) generally saturation cover whole blocks of flats so passed pretty much = connected.

    @MJ or @AF is there any data that enables this rather crucial factor, bridging the real world with the PR world, to be differentiated?

    Look at it another way there will still be a lot of work for OR to do, pre copper switch off, to get premises connected to the fibres on/in the poles/ducts.

    • Avatar Phil

      Hi @A-Builder

      The table shows the total connected lines to FTTP as 352,000 out of 1.5 million passed.

      A news article posted by ispreview https://www.ispreview.co.uk/index.php/2019/04/openreach-making-strong-progress-on-fttp-for-new-build-homes.html indicates that the total lines for FTTP new builds is around 425,000 although 190,000 of that is for the 2019-2020 period so likely not live yet. As we know new builds with FTTP have little choice but take that service so we can make an educated guess that in reality it is a much smaller number of FTTP lines that are copper lines moved to FTTP.

    • Avatar JamesMJohnson

      “The thorny bit is always premises passed vs premises connected”
      Why is it thorny ?
      Not everyone wants a FTTP connection (ie they use a non-supporting provider like Sky etc).
      Until every provider sells FTTP or the gov legalise the forced migration to FTTP then it makes no sense in connecting the property from a commercial perspective (it’s a waste of time and money).
      Surely what matters is that the household has the ability to be connected and that’s the only reliable metric to use at this time.

      As for the decreasing take up… I’m pretty sure this wouldn’t be as bad if they weren’t overbuilding networks.

  3. Avatar Phil

    Hi @JamesMJohnson

    You are right in someways, that if people don’t want it, in some respects it doesn’t matter. However politically and for Openreach as a business, properties passed is being used to judge the success (or failure) of the UK becoming connected by full fibre. The problem is properties passed is the easy bit, connecting up those properties and the eventual retirement of copper, is a huge task that will shadow the effort of passing properties, yet is seemingly ignored.

    At some point people will or be forced to move to FTTP, but could find a waiting list of months and months as Openreach become swamped with orders. Roads, pavements and drives could still need digging up, people will need to take time off work to wait in for engineers that don’t arrive, this happens now with a normal telephone service, so you can imagine the problems with millions of customers moving to FTTP.

    All the above is important when talking about retiring copper and politicians promises and what is a major infrastructure project. I think some people are just questioning the metrics that are being used by Openreach, and trying to point out that properties passed is the tip of the iceberg.

    • Avatar Andrew Ferguson

      Fail to see why the question on premises passed when Mark and myself have both covered the number actually connected and given the assorted caveats too.

      First you need to pass the premises and then subsequent you need to connect them, so seeing the premises passed rise is important and then the connected it and clearly it has escaped peoples notice about plans for bulk migrations etc

      Perhaps we should all just write a headline and not bother with any content.

    • Avatar Phil

      Hi @Andrew

      The caveats about premises passed and premises connected have only just started appearing in news articles since people have started raising the question about it, but it is good to now see. Not sure why you are so against people raising this point and discussing it? Surely the cost and timescales involved to utilise all this fibre that is currently dangling unconnected on telephone poles or in manhole covers is an important point, there is no use passing properties at all if Openreach don’t have the manpower or money to make the final connections to properties, or do so without it taking decades.

    • Avatar Andrew Ferguson

      Not against discussion but annoyed at people seeming to skip the information already presented in articles.

      Why FTTP premises connected is only now appearing, because previously not enough premises were passed to have any confidence in figures derived from sources other than Openreach.

      In terms of news outlets it would be brilliant if Openreach was to pass every property and was failing to hit connection metrics as there would be lots of complaints.

      As for the currently dangling unconnected, where is all this dangling unconnected stuff and is it appearing in the premises passed counts?

    • Avatar Summer Is Here

      I for one think premises passed is more important than premises connected, people have the choice when their property is passed.

    • Avatar Jim Weir

      It’s worth remembering that Openreach have different engineers for Service Delivery & for Infrastructure Build.

      There really is no issue, even when you get to forced migrations many years down the line, natural migration will have dealt with 70% there is no need for a single drop date for everyone else, you can work road by road. It’s a gradual sunset rather than binary.

    • Avatar CJ

      I also don’t understand the concern about premises connected. If there were a long queue of paying customers who had ordered service and were waiting to be connected, there would be a very obvious business case for hiring more technicians to connect them.

      That’s very different to the more speculative decision to hire and train people to build the network past those premises in the first place, with no certainty of return on investment eg. if take-up is slow or the area is overbuilt by other providers. That’s why I’m far more interested in the premises passed figure.

  4. Avatar CarlT

    2.26 million fewer ADSL connections in the past year. Good.

    • Avatar Marty

      Not surprising really with prices dropping from isp’s to remain competitive it should be a no brainer really to upgrade. Although there will be people out there will still need convincing otherwise.

    • Avatar Brian

      And of course still significant number of people without the choice

  5. Avatar A_Builder

    That has sparked off a very interesting debate. The question I was positing was the relationship between passed/connected for OR vs AltNets. Respectfully I can see no data anywhere for the Alt Nets. And I have had a good look for it.

    The issue with premises passed vs connected is how do you value the network rollout.

    You can look at KCOM and get a metric for the market value of a FTTP network but this is a fully connected network.

    How does the market value a partially connected network – not very well by the looks of BT’s share price and OK this is affected by a larger basket of things than just FTTP.

    Again if you look at CityFibre, Community Fibre & loads of other examples there is a metric to the value but this is based around a high level of end user connectivity.

    Various worth posters on this site have pointed out BT’s share price has not gone up as a result of the FTTP deployment and what I was inferring was that this is likely to persist if something is not done to actually start to generating a measurable and reportable ROI for all the welcome cash being splashed around on full fibre. I am 100% behind the Fibre First idea as I believe it will create shareholder/asset value.

    It isn’t only me thinking this way – quote from the Telegraph 2/8/19

    “The return on [BT’s] current investment strategy won’t be seen for some time,” said Arlene Ewing, an investment manager at Brewin Dolphin.

    “In the interim, investors will be keeping a close eye on how BT walks the tightrope between delivering the UK’s full-fibre broadband strategy and offering a high yield to shareholders.”

    Personally I am a bit surprised that it is not more of a phased plan. And I totally accept that fibre to the pole precedes the last drop but 7+% of county has access to FTTP and that does seem something that is worth to start regional marketing or even just house mailshots on.

    OR could even put stickers on the cabs saying “fibre is here” wait where have I seen those before…..:)

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