BT Earnings Beat Estimates as Soccer Lures Web Customers

May 08, 2014 3:51 am ET

(Updates with mobile plans in seventh paragraph.)

May 8 (Bloomberg) -- BT Group Plc beat analysts’ earnings estimates for the sixth consecutive quarter as the biggest U.K. broadband provider lured new customers with the promise of free soccer and rugby games. Shares rose the most in eight months.

Earnings before interest, taxes, depreciation and amortization in the fourth quarter ended March 31 rose 2 percent to 1.71 billion pounds ($2.9 billion) from a year earlier, the London-based company said in a statement today. That beat the average 1.66 billion-pound estimate of analysts, according to data compiled by Bloomberg.

The company has about 5 million customers for BT Sport, the trio of channels free for customers who sign up for broadband service. BT has made a multibillion-pound bet, outbidding pay-TV leader British Sky Broadcasting Group Plc, for broadcast rights to some of the most popular soccer games and using the matches as bait for new broadband customers.

“The model we’ve got is not looking at sport as a single entity,” Chief Financial Officer Tony Chanmugam said in an interview on Bloomberg TV today. “It is part of an integrated package. BT’s proposition is about bundles.”

BT rose 3.4 percent to 389.6 pence at 8:33 a.m. London time, after earlier touching 393.3 pence, the biggest intraday gain since September. The stock had gained 34 percent in the 12 months through yesterday.

Mobile Service

The company is also planning a rollout of a consumer mobile service through its partnership with wireless company EE, which would create a “quad-play” company capable of offering customers a full suite of mobile, TV, phone and Internet services in one package.

BT will start selling a consumer service before the end of the fiscal year while a mobile service for businesses will come out later this quarter, Chief Executive Officer Gavin Patterson said in a call with reporters today.

Subscribers for home-phone lines, which BT used to hold a monopoly on, are declining industrywide as more people rely on mobile or Web-based voice connections. BT lost 49,000 consumer lines in the quarter, offset by 170,000 new broadband connections.

2015 Outlook

BT said it expects Ebitda to be 6.2 billion pounds to 6.3 billion pounds this fiscal year as its underlying revenue stabilizes. That’s in line with the 6.23 billion estimate by analysts in a Bloomberg survey.

The company said its dividend will grow 10 percent to 15 percent this year and next, and there will be a share buyback program of about 300 million pounds both years. The full-year proposed dividend for this year rose to 10.9 pence.

“We expect BT to maintain their positive momentum,” Robin Bienenstock, a London-based analyst for Sanford C. Bernstein, said in a note to investors. “Over the last five years, BT have been building a better, bigger, broader business and critically more stable business, through investments in fiber and TV.”

Sales at BT’s global services business, which serves enterprise customers and represents the company’s biggest source of revenue, fell 4 percent to 1.86 billion pounds. Revenue at the company’s consumer business grew 9 percent to 1.1 billion pounds.

Revenue Decline

Revenue declined 1.3 percent to 4.75 billion pounds in the fourth quarter from a year earlier. Analysts had estimated 4.72 billion pounds for the quarter.

The company has cut capital spending and labor expenses to maintain its profit levels as it builds up its TV offer. Profit before tax rose 9 percent to 901 million pounds.

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.

Rival BSkyB last week reported that sales in the first nine months of the year rose 6.6 percent after signing up more customers for its broadband and TV services. The company is countering BT’s offer by encouraging customers to use more of its products including NOW TV -- which allows customers to stream shows and live sports on laptops, mobiles and Internet- connected TVs without a monthly subscription -- and Sky HD.

BSkyB also announced a joint venture with TalkTalk Telecom Group Plc last month to create a high-speed broadband network that will serve as an alternative to BT’s service.