October 27, 2016 / 6:29 AM / 3 years ago

Demand for fibre helps BT meet forecasts, pension deficit widens

LONDON (Reuters) - BT (BT.L), Britain’s biggest broadband provider, reported a 1 percent rise in second-quarter earnings on Thursday, in line with market expectations and helped by price rises and strong demand for fibre connections to keep it on track to hit its full-year targets.

A logo is seen on a BT engineer's van parked in central London, Britain, February 29, 2016. REUTERS/Toby Melville

Chief Executive Gavin Patterson said the group’s consumer and mobile businesses were stand-outs, boosted by the appeal of Premier League soccer, although “in the enterprise space, UK public sector continues to be a challenging market”.

The company increased the interim dividend by 10 percent to 4.85 pence a share but also said its pension deficit had jumped to 9.5 billion pounds from 6.2 billion at the end of June, “due to both falling corporate bond yields and higher expected inflation”.

Shares in the group reversed early gains to trade down 3.3 percent at 375 pence at 1000 GMT.

The company, which is in talks with regulators about the future control of its Openreach network arm, reported adjusted core earnings of 1.89 billion pounds ($2.3 billion)on revenue up 1.1 percent on an underlying basis at 6 billion pounds.

BT added 76,000 net broadband customers in the quarter, some 65 percent of retail connections, although less than the 79 percent market share it achieved in the previous quarter.

Patterson said the market was “very dynamic”, with “no sign of any slowing down in competition”, pointing to an advertising push from Vodafone (VOD.L) in home broadband and the forthcoming launch of mobile from pay-TV rival Sky SKYB.L.

Some 440,000 customers signed up to fibre connections on the Openreach network in the quarter, with more choosing to do so through rivals like Sky and TalkTalk (TALK.L) than BT for the first time.

Patterson said there was clear demand from consumers for its fibre products. “The consumption of data is going up at 50 percent a year, and we need to make sure the network is fit for that,” he said.

“I’m confident we can do it,” he added, in a riposte to rivals who complain that BT is not incentivised to invest in the faster network their customers want.

Mobile pay monthly net additions for EE, Britain’s biggest mobile network operator which BT bought for 12.5 billion pounds ($15 billion) in January, were 280,000, beating BT’s nearest rival, Telefonica’s (TEF.MC) O2, which reported 199,000 contract additions for the same period on Thursday.

Prepay customers fell by 325,000, however, resulting in a total net loss of 20,000, while O2’s prepay mobile base grew by 32,000.

Nevertheless BT said it “remained on track” to hit its full-year target, which is to achieve growth in underlying revenue and adjusted core earnings of about 7.9 billion pounds.

($1 = 0.8181 pounds)

Editing by Kate Holton, Grreg Mahlich

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