BT results defy analysts

David Meyer
ZDNet UK
July 27, 2006, 14:55 BST

BT has beaten analysts expectations and announced Wi-Fi phones, improved LLU rollout, and renamed The Project Formerly Known As 21CN

BT Group's first-quarter results for the current financial year were released on Thursday to show a growth in revenue of £153m (2.8 percent) — slightly higher than analysts had expected.

The telecommunications incumbent saw also pre-tax profit rise to £615m from £511m in the equivalent period last year. Income from BT Retail dropped by 2 percent, but revenue from BT Wholesale rose by an equivalent percentage.

There was a small rise of 0.3 percent in BT's revenues from small and medium-sized businesses, with 500,000 firms now using the company's business plan. Business broadband revenue, however, was up by 23 percent, with 85 percent of customers choosing premium packages.

The results were the first to show the performance of Openreach, the division split off to allow rivals direct access to BT's exchanges.

Openreach saw a drop in internal revenue (i.e. BT Retail's custom) of 9 percent, but enjoyed a 145 percent rise in external revenue. Overall, its revenue was down by 2 percent.

"If you are replacing traditional business with new business you have to suffer for a while," said BT Group chief executive officer Ben Verwaayen on Thursday, adding that BT's "new wave" business had increased in absolute terms consistently over the last nine quarters.

"The decline in traditional business is half of the increase in new wave," Verwaayen insisted.

Verwaayen also claimed that BT occupied the value-for-money part of the broadband market, as opposed to the lowest-price segment that hosts players such as Orange and Carphone Warehouse, who offer "free" broadband.

"People look to BT for much more than a dumb pipe — they want to have the services," Verwaayen said.

Those services — particularly those surrounding BT Fusion, the company's Wi-Fi-hub-centred convergence offering for the home — will in future be speedily delivered by download, which should make them easier to roll out.

There was also an update on local loop unbundling — where rivals install their equipment in BT exchanges — with the announcement that 932 out of a planned 1,240 exchanges have been unbundled thus far.

Other notable announcements on Thursday included a hint that BT Fusion's "dual-mode" phones, which work as GSM phones while not connected to the Fusion hub, will gain Wi-Fi connectivity in the autumn, which should improve on their current Bluetooth-powered performance.

Interestingly BT's 21CN (21st Century Network) project, which will see the UK's legacy circuit-switching PSTN phone network replaced with an IP-based system, seems to be quietly losing its "N".

"It's more than a network," said Verwaayen, as he insisted "21C" was still on schedule.