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By Simon Zekaria
LONDON--BT Group PLC (BT) Thursday said it is on track to meet
its full-year expectations after it recorded a rise in
first-quarter profit despite lower revenue, due to a boost in
demand for its fiber-optic broadband service and sports television
channels.
The U.K.-based telecommunications incumbent, which is buying
mobile operator EE in a multi-billion dollar deal, said net profit
in the three months to June 30 rose to 511 million pounds ($798
million) from GBP441 million a year earlier.
Earnings before interest, tax, depreciation and amortization on
an adjusted basis rose 1% on year to GBP1.45 billion, in line with
consensus market expectations. Previously, BT said it expected
"modest growth" in adjusted Ebitda in fiscal 2016.
Still, revenue fell 2% on the year to GBP4.28 billion, hit by
currency movements, and came in lower than market forecasts. While
the firm's consumer division posted 3% revenue growth as more
customers switch on to faster Internet broadband and its pay-TV
service, the group's global services and business divisions
recorded a 6% and 2% slide in revenue, respectively.
BT says its core revenue metric is improving quarter-on-quarter.
Revenue excluding transit operations and exceptional items was
flat, compared with a 1.3% decline last quarter and it expects the
metric to show "growth" this year.
"This is an exciting time at BT," said Chief Executive Gavin
Patterson.
BT is plowing investment into its network and sports TV channels
business, both in terms of infrastructure and content, as it
battles hard with other operators like Sky PLC and Liberty Global
PLC's Virgin Media in the U.K.'s rapidly-developing "bundled"
consumer media and telephony sector. BT is also stripping out costs
in the business to boost profitability at a time when it is
spending billions of dollars on exclusive sports TV rights, such as
the English Premier League and Europe's Champions League soccer
competitions--two of the most-watched global soccer
competitions.
In the fight with rivals to offer a full range of telephony and
media services, BT has paid billions of dollars to secure key
exclusive live English and European soccer TV rights to bulk up its
sports channels.
It said it added 60,000 TV customers in the quarter, taking its
TV customer base to 1.2 million.
BT's sports-broadcasting platform is key to its core broadband
business and to plans to compensate for declining fixed-line
telephony customers, that is bringing stiff competition to the
pay-TV market. BT said it has 3.2% consumer fiber broadband
customers, adding 217,000 in the first quarter. 41% of BT's
broadband customer base is now on fiber, it says.
Mr. Patterson also said more than 100,000 consumer mobile
customers have signed up, as the operator bids to complete the EE
deal, which is being scrutinized by regulators.
However, at 0921 GMT, BT shares fell 2.3% to 462 pence, valuing
the company at GBP39.5 billion. Raymond James analyst Stephane
Beyazian said BT is facing an "unprecedented" string of moves by
competitors in the U.K., giving it less room to raise prices.
BT is also fighting off calls by rivals for the firm to separate
off from Openreach, its infrastructure unit. Thursday, the division
posted flat revenue, held back by the impact of regulation.
Write to Simon Zekaria at simon.zekaria@wsj.com
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