May 9, 2019 / 6:44 AM / 12 days ago

UPDATE 3-BT's new CEO throws down the gauntlet on ultrafast fibre

* New CEO sets ambitious 15 million-home fibre ambition

* Needs regulator, government onside

* Will maintain dividend this year, easing investor fears

* Full-year earnings slip 2 pct (Adds CEO quotes, analyst reaction, shares)

By Paul Sandle

LONDON, May 9 (Reuters) - The new boss of BT vowed to roll out full-fibre broadband to 15 million homes by the mid-2020s, offering to spearhead Britain’s shift to ultrafast networks if the government and regulator make it worth its while.

Chief Executive Philip Jansen said the first stage - rolling out fibre to 4 million premises by March 2021 from a previous target of 3 million - could be achieved without cutting the dividend this year.

But the goal of 15 million premises, which would only get the go-ahead if BT could make a return on the multi-billion pound investment, would mean other funding options needed to be explored, including more lending, changing capex priorities and ultimately cutting the dividend.

“Our aim is to deliver the best converged network and be the leader in fixed ultrafast and mobile 5G networks,” Jansen said on Thursday. “We are increasingly confident in the environment for investment in the UK.”

Britain has lagged European rivals in building ultrafast connections, and BT, which operates the national fibre and copper-based network, has come under pressure to do more.

Hitting the 15 million target would mean almost half of premises in Britain had access to the fastest network.

The former monopoly clashed with the regulator Ofcom under its previous CEO Gavin Patterson over how much it could charge rivals and customers to use its infrastructure as it sought to balance the needs of investors with a programme to build the country’s next generation network.

Added to that, Jansen, who came from payment processing firm Worldpay, needs to improve BT’s customer relations, satisfy the pension scheme trustees and pay for expensive sports rights.

“Prices are going down while speed and data consumption are going up,” he told reporters after he presented what he called a solid set of full-year results.

“We are seeing a once-in-a-generation technology shift,” he said. “Nothing is standing still in his market, and I want to make sure neither is BT.”

However, aside from the fibre target, Jansen, who took up the role in February, made few other early strategic changes, for example in sports content, a bigger retrenchment in IT division Global Services or more job cuts.

Patterson announced 13,000 job cuts a year ago, but BT said the following month that he would step down.

EARNINGS DROP

BT reported adjusted revenue of 23.46 billion pounds for the year to the end of March, down 1 percent, as growth in its consumer unit was offset by regulated price reductions in the network business Openreach and declines in enterprise.

Adjusted core earnings fell by 2 percent to 7.39 billion pounds, broadly in line with analyst expectations of 7.41 billion pounds.

BT, which is Britain’s biggest broadband and mobile provider, said core earnings would drop again this year - the third decline in a row - to 7.2 billion-7.3 billion pounds.

However, despite the forecast decline in earnings and its capex requirements, BT did not cut the dividend.

Shares in BT, which are languishing at levels last seen in 2012, were trading down 1.3 percent at 216.3 pence.

Analysts at Hargreaves Lansdown said BT’s biggest challenge was building out the fibre services the UK wants effectively.

“One thing we can say for sure is that BT’s going to be putting its hand in its pocket to fund some extra capital spending, and that means dividend increases are off the menu for the time being.” they said.

“Still, it could have been worse for investors, as some were fearful there’d be a cut, especially with the group’s debts and pension deficit both a nagging worry.”

Editing by Kate Holton/Keith Weir

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