Revenue brightens as BT landlines fade

A strong quarter for both broadband and its TV service BT Vision helped to push shares up 6 per cent to 169.1p last night. Analysts warmed to figures which showed it had recovered from two major profit warnings caused by problems at its key Global Services division, which provides IT services to multinational companies.

Underlying pre-tax profits rose 13 per cent at 496m, beating City expectations. The results prompted BT to raise its forecast for full-year underlying earnings to 5.8bn, up from an expected 5.6bn.

The strong growth in broadband and BT Vision was not enough to lift group revenue, however, which fell by 3 per cent to 4.98bn as call and landline sales were hit by an increasingly competitive marketplace.

BT, which has 5,567 staff in Yorkshire, said 253,000 broadband customers were added by companies using its network in the three months to September 30, nearly double the 169,000 gained last year, and 45 per cent – or 114,000 – of those connected using BT's own broadband service.

The group's broadband TV service BT Vision added 24,000 customers in the quarter – an increase of a third – bringing the total to 520,000. But so far only 50,000, less than 10 per cent, have taken up its subscription Sky Sports service, which was made available in August.

BT returned to profit earlier this year after driving down its costs, mainly through major job losses. It continued to make labour savings in the second quarter by employing fewer contractors and third parties.

Earlier this month it shaved an estimated 2.9bn off its huge pension scheme liabilities to reflect the Government's decision to link pension increases to CPI inflation rather than RPI inflation.

The company raised line rentals and upped the cost of daytime calls in September, but claimed yesterday that both are still cheaper than its main rival Virgin.

BT has set targets to return to revenues growth by 2012-2013, and hopes services such as BT Vision and broadband will help it achieve its goal.

Chief executive Ian Livingston said the roll out of BT's high speed fibre-based broadband, BT Infinity, would be key to lifting sales. It currently has 38,000 customers, increasing by about 4,000 per week.

BT saw sales slide across all divisions, except for Openreach, its business serving other communications providers. Its Global Services division, which provides managed networked IT services for business and Government organisations, was down 2 per cent, again reflecting a decline in UK calls and landline revenue.

But the order intake for the quarter was up to 2.1bn, from 1.4bn a year earlier, after the company signed a number of new contracts, including a three-year extension to its agreement with the Ministry of Defence.

BT's wholesale arm saw revenues drop 5 per cent, which included a one-off regulatory charge of 19m after Ofcom ordered landline providers to cut fees on 0845 and 0870 calls. The group is appealing over this ruling.

Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said the company has begun to deliver across a number of strands, including broadband roll-out and in Global Services.

He added, however: "BT operates in a number of markets which are notoriously competitive, while intense pressure on its fixed line offering remains."