Five things we learned from BT’s full-year results
BT today published its eagerly-awaited results for the full-year, as investors kept a keen eye on the telecoms giant’s plan to turn around its ailing fortunes.
After growing speculation over the company’s targets for full-fibre broadband and a potential dividend cut for beleaguered shareholders, here are five major takeaways from the results.
Read more: BT boosts profits under new CEO despite slip in revenues
Invest to beat the rest
Having served just three months as BT’s new chief executive, Jansen shied away from unveiling a radical overhaul of the firm’s strategy.
However, he has made it clear that the company will renew its focus on building the UK’s full-fibre broadband network, increasing its target from 10m to 15m premises by the mid-2020s.
“BT’s decision to increase the pace and ambition of Openreach's fibre investment programme is more than just an astute business move,” said Ernest Doku, telecoms expert at uSwitch.
“It’s likely to prove a crucial strategic decision as the telecoms giant fights to retain its pre-eminent position in the market.”
But he added Openreach must stick to its rollout timetable if it is to compete in an increasingly competitive market.
“Structural changes have been in abundance in recent years and Jansen’s tone suggests a lot of work is still needed,” said Helal Miah, investment research analyst at The Share Centre.
“He repeated the need of continued investment into several aspects of the business to remain competitive in a challenging and regulated market.”
Regulatory challenges
Jansen warned BT’s ambitious full-fibre targets were subject to the “right conditions” with regards to regulation and policy.
The telecoms firm often clashed with regulator Ofcom under the reign of previous boss Gavin Patterson, and the issue of a legal framework for the broadband rollout has been a hot topic.
“There’s potential for a few twists and turns as decision makers get through the nitty-gritty of where the different parts of this infrastructure splurge sit within the Venn diagram of the public and private responsibility,” said George Salmon, equity analyst at Hargreaves Lansdown.
“Jansen’s increased target of connecting 4m premises with ultrafast technology by 2021 and a further 11m by the mid-2020s is dependent on regulators brokering what he sees as a fair deal.”
Last month it emerged BT fears Ofcom’s power will increase after Brexit, and the firm has called for a shake-up of its role, dashing hopes of a detente between company and regulator.
Tom Stevenson, investment director at Fidelity Personal Investing, noted the continued issue of regulation, describing BT’s comments as a “veiled threat” to Ofcom.
Splashing the cash
Despite challenges across the industry, BT does not appear to be holding back on capital expenditure, and the firm expects to fork out roughly £4bn this year in investments.
Russ Mould, investment director at AJ Bell, said it was “good news BT is not skimping on capital expenditure”, and noted the company is still generating enough cash to fund its capital investment needs.
“One thing we can say for sure is that BT’s going to be putting its hand in its pocket to fund some extra capital spending,” added George Salmon.
The dividend debate
Investors breathed a sigh of relief after BT announced it will maintain its dividend of 15.4p for the full year, despite reports the payout might be cut to fund new investment.
“After the five per cent cut to the interim payment, shareholders in BT could have been forgiven for fearing the worst, so they will be pleasantly surprised,” said Mould.
However, investors will not be able to rest easy, as high capital expenditure means a dividend increase is likely off the cards, while razor-thin margins mean the payout will remain under constant threat.
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A question of sport
BT’s results came on the back of two of the most dramatic Champions League fixtures in history, both of which were broadcast on the company’s sports channel.
Despite the topical excitement, however, BT’s hefty investment in sports rights has been the subject of some criticism, with analysts suggesting the firm could divest that part of its business.
Jansen was today insistent that the company will maintain its investment in sports rights, and said BT Sport had experienced “astounding” demand.
But he admitted BT is taking a “very disciplined approach” to sports rights and said it will not be expanding.
So while BT will be lining up bids for the next Champions League and Premier League rights auctions, question marks remain over their long-term commitment.