BT Ramps Up Fibre Speed As Broadband Boosts Profits

Former UK incumbent BT has posted a healthy set of fourth quarter and year end financial results as the carrier benefited from cost cutting and a growing share of the broadband market.

For the year ending 31 March, profits at BT rose 71 percent to £1.7 billion as sales rose 4 percent to £20 billion. Fourth quarter profits rose a staggering 97 percent to £495 million but quarterly sales fell 6 percent to a little over £5 billion.

“We have delivered profits and free cash flow ahead of expectations for the year,” said chief executive Ian Livingston.

Broadband Push

But what made these results really interesting is BT’s increasingly aggressive push into the broadband market.

BT is pricing its broadband packages competitively and this helped the telco add another 252,000 new broadband customers in its fourth quarter.

Its drive here has been helped by its new energy-efficient Home Hub 3 router, which also offers a feature that selects the best channel for its wireless network.

“We have consolidated our position as the leading provider of broadband in the UK with our highest quarterly share of DSL broadband net additions for eight years,” said Livingston. “BT Global Services order intake was up 10 percent at £7.3bn and it has turned cash flow positive a year ahead of plan.”

Despite the positive spin by Livingston, there is no disguising the fact that the services arm of BT remains its problem child. BT’s Global Services division recorded an operating loss of £141 million on sales 5 percent lower at £8 billion.

This under performance continues to cause concern as BT relies heavily on its services and broadband operations to drive growth.

This is especially the case as unlike other European telcos, BT has no mobile operation to rely on for growth after it spun off BT Cellnet (now of course known as O2, which is owned by Telefonica) in November 2001 in order to reduce its debt burden at the time.

Infinity Speed Increase

Meanwhile,  the BT boss revealed that the carrier will double the speed of its fibre-based Infinity broadband package.

“Openreach saw growth in its copper line base in the year, reversing historic trends. Our roll out of super-fast broadband is one of the most rapid in the world, passing an average of 80,000 additional premises each week and we have plans to roughly double the speed of our fibre-to-the-cabinet based service in 2012,” said Livingston.

BT currently offers a theoretical maximum speed of 40Mbps for Infinity, so those lucky customers connected to a fibre equiped street cabinet, should see their broadband speed double to a possible 80Mbps in 2012.

And of course BT has also already announced that that it is upgrading the maximum possible speed of its copper broadband product, from 8Mbps up to 20Mbps. This has been rolled out and now serves more than 65 percent of UK premises, but said that it will reach 80 percent of  UK premises by December.

Looking forward, Livingston struck a cautiously optimistic tone. “We expect to continue to grow our profits and free cash flow whilst investing to return BT to growth,” he said. “These results show we are making progress, but we are well aware there remains a lot more to do.”

Ducting Confrontation

Despite this positive outlook, there remain some clouds ahead for the carrier. One of the most pressing is its confrontation with rival ISPs over access to its ducting.

Last month a number of BT’s competitors wrote to communications minister Ed Vaizey, warning of a possible boycott of the government’s £830m investment in rural broadband pilots.

Their complaints centre around the prices that BT charges in order to allow them to access its telegraph poles and ducting.

With no signs of compromise between the two sides, Ofcom has warned that it may have to step in and regulate the prices BT charges.