BT revenues drop 6% on regulatory, economic woes

UK fixed-line incumbent BT reported a disappointing 6% fall in third-quarter sales, to £4.5 billion ($7.1 billion), as tough economic conditions, adverse regulation and dwindling revenues from line rentals and calls all took their toll.

Although pre-tax profit was 7% higher than a year earlier, at £675 million, the increase was partly attributed to “the reduced cost of sales due to the decline in revenue”, plus lower depreciation and amortisation charges as the company reins in capital expenditure.

UK fixed-line incumbent BT reported a disappointing 6% fall in third-quarter sales, to £4.5 billion ($7.1 billion), as tough economic conditions, adverse regulation and dwindling revenues from line rentals and calls all took their toll.

Although pre-tax profit was 7% higher than a year earlier, at £675 million, the increase was partly attributed to “the reduced cost of sales due to the decline in revenue”, plus lower depreciation and amortisation charges as the company reins in capital expenditure.

BT (London, UK) largely blamed charge controls introduced by Ofcom, the UK’s regulatory authority, for its revenue decline, and said these would “have a negative impact of around £100–200 million on group revenue in the 2013 financial year with a further similar year-on-year impact in the 2014 financial year.”

Chief executive Ian Livingston touted progress on fibre broadband, which is now available to 13 million premises and used by around 1.25 million homes and businesses, but this could not offset falling revenues from traditional telephony services.

Nevertheless, Livingston reckons the fibre rollout provides an excellent platform for a push into TV and sport later this year.

Take-up of the BT Vision TV service has been sluggish so far – the operator added 21,000 customers in the quarter to give it just 770,000 in total.

When the service was launched in 2007, BT had aimed to attract 3 million customers by 2010.

Meanwhile, BT Wholesale suffered as customers continued to abandon its products for the local-loop unbundling services offered by the BT Openreach division, which bore the impact of Ofcom’s regulatory moves.

But the biggest revenue decline came at BT Global Services, the IT services division that BT originally launched as a growth business to counter the effects of declines elsewhere.

Sales dropped by 8%, to £1.7 billion, “reflecting the continued tough conditions in Europe and the financial services sector”.

Boosted by a cost-transformation program, and a fall in depreciation and amortisation charges, BT Global Services did, however, turn an operating profit of £7 million, compared with a loss of £25 million in the year-earlier quarter.