(Bloomberg) — BT Group Plc’s sales grew for the first time since 2017 after customers signed up to fiber optic connections and the London-based telecom group raised tariff prices above inflation earlier in the year.
However, shares fell as much as 5.7% after a weak performance at its Enterprise division, which sells connectivity and other services to businesses.
- Revenue in the first quarter rose 1% to £5.13 billion ($6.25 billion), roughly in line with £5.09 billion-pound average estimate of analysts surveyed by Bloomberg.
- BT posted adjusted earnings of £1.9 billion before interest, tax, depreciation and amortization, in line with analyst estimates.
Key Insights
- The fiber optic rollout and customer connections are “both ahead of our own expectations,” Chief Executive Officer Philip Jansen said, while flagging challenges in the Enterprise division.
- “Be under no illusion though, we need to pass our price increases that we’re experiencing on our cost base onto our customers, like every business. It’s a tough, very tough time,” he said on a call with reporters.
- Jansen added that “the market is softer than we would like across the large corporate space. So big projects, people moving away from the old stuff to the new, is not going as fast as we would like.”
- Analysts were quick to highlight BT’s challenges in its Enterprise unit, with Bernstein’s Stan Noel describing it as a “drag” in a note to clients on Thursday.
- Jefferies analyst Jerry Dellis wrote that “the promise of a second-half Enterprise recovery without greater clarity on the plan, and management’s ability to deliver this against the weak economic backdrop, leaves investors lacking adequate visibility at this stage.”
- BT said it’s got contingency plans in place for strikes from its biggest union due Friday and Monday, as workers demand a bigger pay increase to keep up with inflation.
- BT shares took a hit earlier in July after the news that chief rival Virgin Media O2 — owned by Liberty Global Plc and Telefonica SA — was in discussions about potentially acquiring major customer TalkTalk Telecom Group Ltd.
Market Context
- BT shares fell as much as 5.7% to 166 pence in London on Thursday. They were trading down 4.7% at 8:16 a.m., erasing gains made since the start of the year.
- Of the 25 analysts surveyed by Bloomberg, 14 rate the stock Buy, 8 Hold and 3 Sell.
Get More
- Statement
- Virgin Media O2 in Discussions to Acquire Rival TalkTalk
- BT CEO Faces Furious Staff in Town Hall, Says He Can’t Boost Pay
- BT Workers Vote in Favor of Firm’s Biggest Strike Since 1987
(Updates with additional CEO comments.)
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