BT Group Plc (BT/A), the U.K.’s largest fixed-line phone company, posted a higher fiscal first-quarter profit as it won high-speed broadband clients and market share from rivals TalkTalk Telecom Group Plc (TALK) and Virgin Media Inc.
BT, which is rolling out its high-speed fiber services, added 141,000 net broadband customers to its retail unit in the three months through June, it said today. TalkTalk and Virgin Media Inc. both reported subscriber losses. Pay-TV operator British Sky Broadcasting Group Plc (BSY), which also offers broadband services, is scheduled to report earnings tomorrow.
“BT and Sky have been the winners and pretty much everyone else has been the losers,” BT Chief Executive Officer Ian Livingston said today. “Customers are voting with their feet.”
BT, based in London, is building out its high-speed fiber services to counter declining revenue from its traditional fixed-line offerings. The company plans to spend 2.5 billion pounds ($4.1 billion)for a faster network serving two-thirds of British homes by 2015. Earnings before interest, taxes, depreciation, amortization and costs from job cuts climbed 2.6 percent to 1.44 billion pounds in the fiscal first quarter, BT said today. Analysts had estimated 1.42 billion pounds.
BT climbed as much as 3.4 percent to 197.2 pence in London trading and was up 2.3 percent as of 11:44 a.m., valuing the company at 15.2 billion pounds. The stock has risen 8.5 percent this year, while the U.K. benchmark FTSE 100 index dropped 1.5 percent.
TalkTalk said today its rate of client losses increased and Virgin Media yesterday said it lost customers for the first time in two years. Virgin, which is rolling out its 100 megabits-per-second broadband service, lost 36,000 net customers in the three months through June as it pushed subscribers to take faster, more expensive broadband offerings. Revenue climbed 3.9 percent in the period.
The U.K. market is dividing “between premium customers who are willing to pay for premium content and connectivity and those who are more price sensitive,” said Robin Bienenstock, an analyst at Sanford C Bernstein.
BT said today it had a pension deficit of 1.8 billion pounds at the end of June, compared with a deficit of 1.4 billion pounds at the end of March.
BT said in May a regulator’s review of its pension funding program was halted, ending a year of talks over the scale of the recovery plan. The watchdog said at the time that it still had “substantial concerns” about an agreement with the trustees of BT’s pension program to pay down the liability.
The company today reiterated its full-year forecast and said it is making “progress towards delivering our financial, operational and growth goals.”