Battered BT meets its targets as it prepares for make-or-break decisions

BT chief executive Gavin Patterson said “it’s not as bad as it looks” as the company’s international business undermined efforts to recover from series of heavy blows to its finances.
Facing a crucial few months of decisions on BT’s massive pension liabilities, investment in broadband infrastructure upgrades and its flagging attack on the pay-TV market, Mr Patterson was at least able to point to a second quarter performance in line with forecasts.
Global Services, the international unit that earlier this year triggered a major crisis when hundreds of millions of pounds of fraud was uncovered in its Italian unit, continued to struggle. Its revenues were down by a tenth, despite a boost from the weak pound, amid rapid technology shifts in the corporate IT market.
BT said it was taking “robust action” to tackle the problems in the unit by slashing thousands of jobs and moving more services online.
However, it was the biggest factor in a 2pc overall drop in BT’s second quarter revenues to ?6bn, outweighing growth in the other markets. EE, the mobile arm, reported a 4pc sales increase on strong demand for data services. At Openreach, the regulated network monopoly, sales were up 1pc as more consumers upgraded to superfast broadband.
Together with higher sports rights costs and spending to bring call centres back to the UK, the weak performance from Global Services meant adjusted earnings before interest, tax, depreciation and amortisation was down 4pc on last year at ?1.8bn. Pre tax profit, which included some one-off benefits, was down 1pc at ?666m.
After a hellish first half to its financial year, BT slightly beat most City forecasts. Yet the shares were marked down again after it revealed a lower than expected interim dividend. There was no change to the overall policy of increasing shareholder payouts, but the interim dividend will now be set as 30pc of the prior year’s final dividend.
Battered BT meets its targets as it prepares for make-or-break decisions

BT boss Gavin Paterson
BT shares ended the day down 2.7pc as investors who had budgeted for a higher cash return at mid-year were frustrated. The company has lost more than a third of its value since the turn of the year.
Mr Patterson said the new dividend system move would make BT more predictable in the long term.
He said: “I’m sure the were some people holding on for an interim dividend that might have been higher. If that’s the case so be it.”
BT’s consumer arm is now wrestling with how to bid in the next Premier League rights auction, due at the end of the year, against an uncertain market backdrop. Its own pay-TV service attracted only 7,000 new customers in the second quarter, compared with 63,000 in the same period last year.
Mr Patterson said the company would be able to maintain its role as a credible number two player in the market behind Sky with a weaker set of Premier League rights than under the current three-year deal.
He said: “There is a line in the sand that we are not prepared to go beyond. The football market is pretty saturated I think in terms of paying customers. If the numbers get too racy we will step back.”
BT is facing multiple calls on its cash flow, as triennial pension deficit top-up payment discussions come to a head and political pressure for investment in full fibre-optic networks mounts.
Battered BT meets its targets as it prepares for make-or-break decisions

The next Premier League auction is at the end of the year
The company is due in the coming weeks to begin a consultation with tens of thousands members of its final salary pension scheme over potential closure of the fund to new accruals. It is also seeking to reassure pension trustees that pensions will be paid and avoid higher deficit payments by handing them rights over Openreach assets in the event of insolvency.
The network unit, in the process of being legally separated from BT with its own board, is meanwhile due in December to set out pricing and coverage proposals to connect 10 million homes with fibre optics by around 2025. The upgrade is expected to cost between ?3bn and ?6bn, and Openreach is in talks with Vodafone about potential joint investment in cities.
The digital minister, Matt Hancock, today praised Openreach’s efforts but called on BT to speed up the separation process.
He warned: “Unless we make significant progress very soon we will have to talk to Ofcom about what would be needed to make this happen.”
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