Although it claims to have made strong progress on strategic priorities with a record build rate for FTTP combined with strong demand in its Openreach division, leading UK telecoms company BT recorded disappointing half-year results, with a notable decline in profits and revenues compared with previous year.
For the first half of the year to 30 September 2024, BT recorded adjusted revenues of £10.1 billion, down 3% year-on-year, mainly due to “difficult conditions” in its business division, driven mainly by non-UK trading in its global business and portfolio. . Channels.
Elsewhere, lower CPI and continued competitive markets in the consumer line were broadly offset by growth in its Openreach broadband business. This is due to increased prices, growth of the Ethernet network base, and improved volume and mix of fiber to the premises (FTTP).
The company’s adjusted EBITDA was £4.1 billion, up 1%, with revenue flowing through more than offsetting cost shifting. However, reported earnings before tax were £1.0 billion, down 10% due to Primarily due to lower revenues, higher specific costs and higher net income. Financing expenses, partially offset by a decrease in reported operating costs.
In line with the reported trend in 2024 to the satisfaction of the UK investor community, capital expenditure (capex) for the half year was £2.3 billion, down 2% with peak capex reported in FY24 exceeded, primarily due to Lower networking spend despite building higher FTTP due to lower unit costs and efficiency. Net cash flow from operating activities was £3 billion with normalized free cash flow of £0.7 billion.
While the company experienced difficulties in the business division, the fiber supply side continued to grow from strength to strength. In the six-month period, there was a record FTTP build rate of 2.1 million, with the FTTP footprint surpassing 16 million builds in October – around half the UK.
There was strong customer demand for Openreach FTTP in Q2, with a record net addition of 446,000 and a total of 5.5 million connected premises with occupancy increasing by 35%. Growth in FTTP as a proportion of BT’s broadband base contributed to a decline in 12-month fix volumes from 300,000 to three million, supporting growth in margin and EBITDA.
BT’s retail FTTP base grew 35% year-on-year (y-o-y) to three million, of which consumer represented 2.8 million and business 200,000. Openreach’s broadband line losses in the first half were 377,000, representing a 2% decline in Broadband base. BT noted that it continued to see moderately higher competition losses as overall broadband and the new homes market weakened.
To this extent, the company has now increased its FY25 build target to 4.2 million within its existing capital portfolio driven by construction cost efficiencies and the company is on track to reach 25 million builds by December 2026.
In addition to the progress in fibre, during the half-year BT saw its EE 5G mobile division base rise by 25% compared to the previous year to a total of 12.5 million customers.
BT has now provided medium-term guidance that “confirms our EBITDA, capex and cash flow, albeit on lower forecast revenues”. It expects sustained growth in adjusted revenue and EBITDA growth ahead of revenue, underpinned by cost shifting from FY26 to FY30. It expects to see capex excluding spectrum at less than £4.8bn through FY26, down about £1bn. GBP after the peak of FTTP construction.
As she assessed the half-year results, Alison Kirkby, CEO of BT, emphasized the strength of the fiber rollout and how the company had accelerated its modernization process.
“We enhanced our full fiber build and connections, saw further improvements in customer satisfaction, and our cost shifting contributed to EBITDA growth and normalization of free cash flow despite lower revenues due to our non-UK operations and the competitive retail environment,” she said.
“Our nationwide rollout of full fiber has set new records, now reaching more than 16 million buildings, and we have expanded our industry-leading uptake rate to 35%. Our build cost continues to decline, enabling us to increase this year’s build target to 4.2 million without additional capital expenditure.
“We have also expanded our 5G network to cover 80% of the UK population, more than any other operator. These investments in next-generation networks in the UK enable much better experiences, which is reflected in our net promotion results.”
