BT Shares Jump as Sport Customers Help Earnings Beat Estimates

Jan 31, 2014 4:24 am ET

Jan. 31 (Bloomberg) -- BT Group Plc, the biggest U.K. phone company, rose the most in five months after reporting third- quarter earnings that beat analysts’ estimates as more customers were lured by free sport TV channels.

Adjusted earnings before interest, taxes, depreciation and amortization were little changed at 1.54 billion pounds ($2.54 billion) in the three months ended Dec. 31, the London-based company said in a statement today. Analysts surveyed by Bloomberg had on average projected Ebitda of 1.5 billion pounds.

BT has more than 2.5 million customers for BT Sport, who get the channels free with a BT broadband subscription. The company in November outbid British Sky Broadcasting Group Plc for the broadcast rights to UEFA Champions and Europa League, two of the most popular soccer tournaments. Chief Executive Officer Gavin Patterson said today that the company has no plans to sell BSkyB wholesale rights to broadcast the games.

“The investments we’ve been making continue to deliver,” Patterson said on a call with reporters today. “Sport should be judged in the medium term on whether our consumer business is growing on a sustainable basis, on revenue and profit.”

BT rose 3.1 percent to 382.5 pence in London trading at 9:07 a.m. after earlier touching 386.3 pence, the biggest intraday gain since September. The stock had risen 48 percent in the 12 months before today. BSkyB dropped 0.8 percent to 871 pence.

Ebitda Guidance

BT is working to win broadband customers to compensate for declining home phone connections as more subscribers rely exclusively on mobile or digital voice services. The company lost 70,000 consumer lines in the quarter, offset by 150,000 new broadband customers.

Ebitda for the year will probably come in at the high end of the 6 billion pounds to 6.1 billion pound range previously forecast, BT said in the statement. Third-quarter revenue rose 2 percent to 4.6 billion pounds, which beat the 4.52 billion-pound estimate from analysts in a Bloomberg survey. Profit before tax rose to 722 million pounds, up from 666 million a year earlier.

The company made a 60 million pound deposit for its UEFA league rights in the quarter. BT in November agreed to spend 897 million pounds for three seasons of UEFA Champions League and Europa League soccer tournaments starting in 2015, two of the most popular contests. That’s in addition to the 1 billion pounds on rights the company had committed to spend over three years when it began the BT Sport and ESPN channels for its customers last year.

Broadband Boost

BSkyB, the country’s largest pay-TV broadcaster and the company that lost the UEFA rights to BT last year, yesterday reported that first-half sales rose 6.3 percent after signing up more customers for its broadband and TV services.

BT expects the next round of broadcast rights for Premier League games, the main tournament for England’s soccer clubs, to be in the “November to February” period. Patterson declined to comment on how much these rights might cost.

Turf War

The two companies are dueling for customers as more people choose to get Internet, phone and TV services from the same provider. Their rival bids for sports broadcast rights have nearly doubled the price for some of the licenses, such as the U.K.’s Premier League soccer games that BT and Sky competed for in 2012.

It “remains crucial” for Sky to win the next set of Premier League rights, expected to be auctioned in the next nine to 15 months, Sanford C. Bernstein analyst Claudio Aspesi said in a note to investors yesterday. “Doing so at a reasonable cost is imperative for the company’s economics.”

--Editors: Mark Beech, Robert Valpuesta