BT Shares Jump to 5 1/2-Year High as Profit Beats Estimates
BT Group Plc, the U.K.’s largest fixed-line company, reported fourth-quarter profit that beat analysts’ estimates after adding high-speed Internet service customers. The shares jumped to the highest level since 2007.
BT surged 12 percent to close at 309.5 pence in London, the biggest gain since 2009. The stock has gained 34 percent this year.
BT reported adjusted earnings before interest, tax, depreciation and amortization rose 4 percent to 1.67 billion pounds ($2.6 billion) in the quarter ending in March, in a statement today. Analysts had projected 1.62 billion pounds, according to the average of estimates compiled by Bloomberg.
BT said yesterday it will offer its new BT Sport channels free with broadband subscriptions to make its bundles of phone, Internet and TV service more appealing, sinking shares of competitor British Sky Broadcasting Group Plc. While the investment, which will probably cost the company 1 billion pounds in rights alone in the next three years, will lose money in the near term, it’s expected to drive up subscriptions and increase loyalty, executives said at a press conference.
“This offer has three potential pay-offs for BT: the first and most important is to regain retail broadband market share; the second is to increase fiber uptake and the third is to accelerate growth of the lower end pay-TV market,” Sanford C. Bernstein analyst Robin Bienenstock said in a note to investors yesterday. “This is the end of price inflation in the U.K. pay-TV market; ushering in an era of increasing pressure on TV margins.”
BT sales fell 1.8 percent to 4.79 billion pounds, the London-based company said today in a statement.
The company will release three new channels in August before the Premier League soccer season, it said at the event near its London TV headquarters in the Olympic Park. The BT Sport 1, BT Sport 2 and ESPN channels will also stream on the Web and through applications for mobile phones.
The company said adjusted Ebitda would be 6 billion to 6.1 billion pounds this fiscal year, in line with the 6.1 billion pounds forecast by analysts in a Bloomberg survey. Adjusted Ebitda for the fiscal year ending in March 2015 is forecast to be 6.2 billion pounds to 6.3 billion pounds.
BT has a “strong financial outlook despite significant strategic investments, particularly in BT Sport,” according to the statement.
“The key for us is we’ve got to balance off the short term and the long term,” BT Chief Financial Officer Tony Chanmugam said in an interview on Bloomberg TV today. “We’re funding the investment by continuing to reduce our costs. That allows us to invest in the future.”
BSkyB shares dropped 6.2 yesterday, the biggest decline since July 2011. The U.K.’s biggest pay-television broadcaster declined 2.5 pence to 806.5 pence today.
The TV channels will compete with free sports programming from the publicly funded British Broadcasting Corp. and paid services offered by BSkyB.
BT has poached star presenters from other networks, including BBC Radio veteran Clare Balding, former English national rugby team captain Lawrence Dallaglio, and Jake Humphrey, a former host of the BBC’s Formula One broadcasts.
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