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BT sees 'best growth for seven years' ahead of EE takeover
February 1, 2016 / 7:23 AM / 2 years ago

BT sees 'best growth for seven years' ahead of EE takeover

LONDON (Reuters) - Britain’s BT Group (BT.L) reported on Monday the best revenue growth in over seven years in the last three months of 2015, helped by a strong performance in its consumer broadband business, as it sets about incorporating newly acquired mobile network operator EE.

A BT logo is seen on a building in London, February 5, 2015. REUTERS/Suzanne Plunkett

Chief Executive Gavin Patterson said BT would retain the EE brand, which has been promoted by actor Kevin Bacon in EE’s TV commercials and already has 35 percent of the mobile market.

“We will operate a multi-brand strategy with UK customers being able to choose a mix of BT, EE or Plusnet services, depending on which suit them best,” he said.

BT’s acquisition of EE from Orange (ORAN.PA) and Deutsche Telekom (DTEGn.DE), valued at 12.5 billion pounds when it was announced last year, closed on Friday, bringing the market leaders in consumer fixed line and mobile broadband together.

Patterson said EE had built a strong brand around superfast 4G mobile broadband that served a different part of the market to the BT brand.

“We believe there’s room for both brands and they’ll be able to provide a wider choice for consumers going forward,” he told reporters.

BT said EE’s consumer products and stores would be one of six units in the reorganisation of the group.

Another new division, called business and public sector, will serve enterprises with combined fixed-line and mobile products, an area analysts have said is ripe for exploitation since EE has lagged mobile rivals Vodafone (VOD.L) and O2 UK in the business market.

The acquisition of EE completes a transformation of BT from a staid former fixed-line monopoly into an aggressive competitor in television content, where it is taking on Sky (SKYB.L) to secure expensive live football rights, as well as in superfast fibre broadband.

“Customers like what we’re offering, whether that’s superfast broadband, Champions League football or mobile data bundles,” Patterson said.

BT’s growth has not come at the expense of Sky, however, which on Friday said it had added 144,000 broadband customers, ahead of BT’s 130,000 retail broadband customers.

A man looks toward Telecom Tower from Primrose Hill in London, Britain, December 29, 2015. REUTERS/Peter Nicholls

Analysts view TalkTalk (TALK.L) as being the loser in the telecoms and TV services market after it suffered a high-profile data breach last year.

Patterson, however, said BT’s growth was driven by factors such as its Champions League football coverage, which started last summer, rather than the misfortunes of rivals.

BT topped the FTSE 100 index <0#.FTSE> on Monday after it posted a 3 percent rise in core earnings to 1.6 billion pounds ($2.3 billion) on a better than expected 4.7 percent rise in revenue to 4.6 billion pounds in the quarter ended Dec. 31.

The shares were up 3.2 percent at a two-month high of 500 pence at 1139 GMT.

Citi said BT’s improved revenue forecast for the full year ending in March of a rise of 1-2 percent from its previous forecast of “growth” left room for consensus upgrades.

“BT has taken the opportunity of the EE acquisition to make what looks to us to be a sensible business reorganisation,” it said.

The big remaining question for BT is whether industry regulator Ofcom will decide in it current market review that BT should spin off its fixed line network arm Openreach, a move urged by rivals including Sky and TalkTalk.

Patterson said BT had made a strong case to retain the unit, which is run at arm’s length. “We have a model that works,” he said. “Any separation would put that at risk.”

Ofcom is due to publish the initial findings of its review later this month.

In the meantime Ofcom has called for the EU competition regulator to block the proposed acquisition of Telefonica’s (TEF.MC) O2 UK by CK Hutchison’s (0001.HK) Three, according to the Financial Times.

The FT quoted Ofcom’s chief executive Sharon White as saying she was concerned that the merger of two of the UK’s four mobile network operators “could mean higher prices for consumers and businesses”.

(This version of the story adds CEO quotes, analyst reaction, shares, and corrects spelling of “sets” in first paragraph)

Editing by Kate Holton, Greg Mahlich

Our Standards:The Thomson Reuters Trust Principles.
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