LONDON (Alliance News) - BT Group PLC Friday reaffirmed its outlook for the full year as it posted pretax profit ahead of analyst expectations in its third quarter, and said that it is making "good progress" on its due diligence in relation to the potential acquisition of EE Ltd.
The company also announced that it has agreed a 16 year recovery plan with the trustee of the BT Pension Scheme.
BT is in talks to buy the Orange and Deutsche Telekom AG joint venture for GBP12.5 billion. It plans to fund the acquisition through cash and shares, with Deutsche Telekom to take a 12% stake in BT, and Orange a 4% stake. The acquisition would bolster BT's planned re-entry into the consumer mobile market after more than a decade's absence.
BT said that its plans to launch a consumer mobile offering "remain on track", although it did not provide a timetable for the launch of this offering.
BT posted a pretax profit of GBP694 million for quarter to end-December 2014, up from GBP617 million a year before, and ahead of consensus analyst expectations of GBP658 million, although revenue came in lower at GBP4.48 billion, down from GBP4.60 billion, just missing analyst expectations of GBP4.49 billion.
This was primarily due to a reduction in operating costs before depreciation and amortisation of 5%.
BT attributed the decline in revenue to the timing of contract milestones within its BT Global Services business, which bolstered its third-quarter results last year. BT Consumer revenue was up 7%, driven by growth in broadband and television, whilst BT Business declined due to lower call and line volumes.
The company improved its consumer line losses to 60,000 in the quarter, compared to 85,000 a year before, and added 119,000 retail broadband customers during the quarter. It added 209,000 retail fibre broadband customers during the quarter, takings its customer base to over GBP2.7 million, it said. In the just over a year since it launched BT Sport, 25,000 commercial premises have signed up for the service, BT said.
BT Wholesale saw an improvement on the second quarter, but continued to be hit by telecoms regulator Ofcom's narrowband market review. Openreach saw revenue decline due to regulatory price changes offsetting growth in fibre broadband.
BT continues to expect its full-year earnings before interest, tax, depreciation and amortisation of GBP6.2 billion to GBP6.3 billion, with further growth expected in the following year. It expects to see normalised free cash flow of more than GBP2.6 billion this year, and for this to grow in the following year.
BT also intends to grow its dividend by 10% to 15% in both this year and next, and maintain its share buyback of around GBP300 million this year, and in the two following years, which it hopes will counteract the dilutive effect of employee share options plans that are maturing over the same period.
The company said it has reached an agreement with the trustee of its pension scheme on the 2014 triennial funding valuation, and a 16 year recovery plan for the pension scheme. The funding deficit of the scheme is GBP7.0 billion as at June 30, 2014, BT said. Over the next years it plans to pay a total of GBP2.0 billion, BT said, and then for the seven years from 2018 to 2024, it will make payments in line with its previous 2011 agreement.
Following this it will make five annual payments of GBP495 million through to 2029, and a final payment of GBP289 million in 2030. BT said it had also discussed details of the potential EE acquisition with the pension trustee.
BT has also outlined plans to deliver faster broadband for homes and small businesses through the deployment of what it calls "G.fast" technology, which it plans to test in two pilot locations starting this summer.
The technology will deliver speeds of up to 500 megabits per second to most of the UK within 10 years, BT said, and deployment will begin in 2016 and 2017 if the pilots are successful.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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