Strong signals from BT as sports service proves a hit

BT, which is offering sports channels along with its core broadband offering, said consumer revenue was up four per cent, its best performance in 10 years.

Group revenue was flat – the first time it has not contracted in more than four years – while adjusted profit before tax, up two per cent to £609m, was ahead of forecasts.

“These are good results, with growth in earnings per share and free cash flow,” said Mr Patterson, the former head of BT Retail who was promoted to CEO in September. “BT Sport has made a confident start and is already delivering for viewers. It is also delivering for the business.”

BT, which had been cutting costs to recover from two profit warnings in 2008 and 2009, surprised the sporting world in 2012 when it agreed to pay £246m ($382m) per season to show 38 live football matches.

It put BT up against the dominant pay-TV group BSkyB which has the right to show 116 games per season.

BSkyB has already seen off two other challengers in the British pay-TV market.

The move was designed to help BT defend its core broadband business, offering new sports channels for free to existing broadband customers who renewed their contracts or to those who signed up as new customers for BT broadband.

It knocked the group’s core earnings by four per cent, as expected, but analysts said the strong operating performance would help to offset this over time.

BT said more than 2m homes had signed up for the new sports service and it was now in 4m homes due to a wholesale deal with cable operator Virgin Media.

“BT Sport may grab the headlines, but these numbers are a reminder of the sheer size and scope of the business,” said Richard Hunter, the head of equities at Hargreaves Lansdown Stockbrokers.

“BT remains a company in transition but it already has extremely firm foundations in place for further progress.”

In broadband, the BT Retail unit took 93 per cent of all new lines that were switched on across the BT network, or 156,000 out of 168,000.

BSkyB reported growth of 111,000 in the last three months to the end of September.

“BT’s results today demonstrate that a turnaround followed by a sustained period of improvement in results is achievable with the right strategy,” analysts at Bernstein said yesterday.

In June, BT’s chief executive Ian Livingston revealed he was stepping down to take up a Government role. BT shares fell when it was confirmed that Mr Livingston would replace former HSBC chairman Stephen Green as Minister for Trade and Investment in December.

When Mr Livingston took over at BT Group in June 2008, the former state-owned monopoly was burdened with huge debts and spiralling costs. Within months the telecoms giant issued a shock profits warning as its global services arm – which handles telecoms networks for major organisations – missed City targets by £80m.

Mr Livingston was charged with cleaning up the mess and slashing costs. The Scot, who joined BT as group finance director in 2002, before taking over as chief executive of BT Retail in 2005, succeeded Ben Verwaayen, who stood down after more than six years at the helm.

He wrote down £1.3bn on several major contracts amid a rapidly deteriorating economic climate.

Thousands of jobs were axed and BT set about attempting to plug a £4bn gap in its vast pension scheme. The group’s turnaround has seen BT reduce costs, boost profits, hike dividends and bring its pension deficit under control.

Speaking in June, Mr Patterson said: “The company is in a strong place. We have great opportunities ahead.”

Through the ages

BT is the world’s oldest communications company. It can trace its roots back to The Electric Telegraph Company, which was incorporated in 1846.

In 1984, the privatisation of BT, which was a state-owned business, paved the way for privatisations around the globe.

The successful privatisation of BT encouraged Prime Minister Margaret Thatcher’s Government to carry out a wave of sell-offs, including British Gas, which was sold in 1986.

Gavin Patterson, the chief executive, joined BT nine years ago as group managing director of BT retail’s consumer division. Before this, he spent four years at Telewest, which is now Virgin Media, as managing director, consumer.