BT Earnings Beat as Web Customers Fight Corporate Dropoff

BT Group Plc (BT/A), the U.K.’s former phone monopoly, reported better-than-expected quarterly earnings as free sports channels attracted more broadband customers and offset declines in its other businesses.

Adjusted earnings before interest, taxes, depreciation and amortization were little changed from a year earlier at 1.44 billion pounds ($2.4 billion) in the first quarter ending in June, the London-based company said in a statement today. That beat the average 1.42 billion-pound estimate by analysts in a Bloomberg survey.

The consumer business, which sells broadband and TV access to homes, was the only unit that reported sales growth, logging a 10 percent increase in revenue. BT is luring customers for its high-speed broadband packages by offering Web customers free access to three sports TV channels. The company added 341,000 premises to its fiber broadband service in the quarter bringing its total to more than 3 million.

“Sport continues to do very well,” Chief Executive Officer Gavin Patterson said on a call today. “The base is growing and it’s growing in spite of this being effectively the slowest time of the year.”

BT shares rose 1.5 percent to 393.8 pence at 8:49 a.m. in London trading, taking the advance to 3.8 percent this year.

The company is also developing new mobile-phone plans, through a partnership with wireless company EE, as it looks for new sources of growth outside the shrinking market for home-phone lines.

Corporate Declines

BT’s revenue fell to 4.35 billion pounds in the first quarter from 4.45 billion pounds a year earlier. Analysts had estimated 4.35 billion pounds.

Revenue at BT’s global services business, its largest unit by sales, declined 6 percent to 1.65 billion pounds. BT Business, which serves U.K. companies, fell 3 percent to 762 million pounds while Openreach, the network BT makes available to other carriers, was unchanged at 1.25 billion pounds.

“We’ve seen some improvement, but there is a degree of caution that we’re seeing from customers,” Patterson said on the call. “We’re also seeing technology changing where customers are moving away from traditional voice products and more toward” digital voice products, “and you’re going to see some price deflation on the back of that.”

Adjusted profit before tax rose 7 percent to 638 million pounds from a year ago. Earnings per share, excluding some items, climbed to 6.5 pence from 5.9 pence.

When BT started the BT Sport and ESPN channels in 2013, it committed to spending 1 billion pounds in three years on sports rights. Since then, the company has agreed to spend another 897 million pounds for three seasons of UEFA Champions League and Europa League soccer tournaments starting in 2015.

The company’s biggest competitor for TV customers, British Sky Broadcasting Group Plc, has announced plans to buy Sky Italia and a stake in Sky Deutschland AG, which would give BSkyB access to 20 million subscribers in five countries.

To contact the reporter on this story: Amy Thomson in London at athomson6@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net Robert Valpuesta, James Boxell

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