BT Group’s half-yearly financial report for 2023 presents a complex narrative of the company’s performance. While certain aspects of the report reflect positive developments, there are challenges that the telecommunications giant must address to sustain its growth trajectory.
Revenue Diversification and Challenges: The reported revenue of £10.4 billion remains unchanged from the previous year, with adjusted revenue showing a modest 3 percent increase. This growth, driven primarily by fiber-enabled product sales and price adjustments, is commendable. However, it is imperative to note the softer market conditions affecting BT Group’s broadband base. With broadband line losses of 255,000 in H1, the company’s target of a decline of around 400,000 in FY24 might be at risk due to these challenges.
The company’s CEO, Philip Jansen, expressed satisfaction with the results, emphasizing the successful execution of their plans. BT has already announced a new CEO in place of Philip Jansen, who will be leaving the telecom giant at the end of the year.
Investment and Capex Rationalization: BT Group’s strategic reduction in capital expenditure (capex) by 11 percent to £2.3 billion is a double-edged sword. While it reflects a disciplined approach to spending, it also raises questions about the extent of the company’s investments in future-proof technologies. The decrease in fixed network spending, although attributed to lower FTTP build costs, could indicate a slowdown in infrastructural development.
BT has revealed that FTTP build rate accelerated to 66,000 per week delivering a record of 860,000 premises passed in the quarter. BT’s FTTP footprint is now expanded to 12 million premises with a further 6 million where initial build is underway.
BT said there was a strong customer demand in Openreach for FTTP with net addition of 364,000 in Q2, bringing take-up rate to 33 percent. Openreach broadband ARPU grew by 10 percent due to price rises and increased volumes of FTTP.
Comparing with the previous year, the reduction in Capex reflects a strategic shift, aligning with BT Group’s future vision and financial goals. The company plans to continue this approach, focusing on high-impact, cost-effective investments.
BT is lowering its Capex guidance to £5 billion for fiscal 2024. BT said it has benefitted from unit build costs in full fibre rollout in the lower half of £250-£350 per premise range.
BT is targeting Capex of £5 billion – £5.1 billion from FY24-FY26. BT has also indicated that there will be £1 billion reduction in Capex post peak fibre build in FY2028.
Digital Transformation Efforts: BT Group’s commitment to digital transformation is evident. The company’s efforts to modernize IT, streamline products, and embrace next-generation networks are crucial steps in staying competitive. However, the report lacks specific details on the impact of these initiatives, leaving stakeholders in the dark about the effectiveness of the ongoing transformation efforts.
Challenges in Customer Retention: Despite stable churn rates in broadband and postpaid mobile services, the declining customer base in certain segments demands attention. The fact that BT Group is losing ground in areas without FTTP coverage is a clear indication of the challenges faced in retaining customers amidst evolving market dynamics.
Strategic Collaborations and Future Outlook: The partnerships with Google Cloud and the British Army are promising, indicating a proactive approach to expanding service offerings. However, the report does not provide sufficient details on the potential revenue streams and long-term implications of these collaborations, leaving investors with uncertainties.
Conclusion: BT Group’s H1 2023 report reflects a company at a crossroads. While there are positive developments in revenue diversification and strategic collaborations, challenges in customer retention and market dynamics pose significant threats. The company’s digital transformation efforts, although highlighted, lack transparency in terms of their impact on operational efficiency and customer experience. As BT Group navigates the complexities of the telecommunications landscape, addressing these challenges transparently and decisively will be crucial for its sustained success.
Rajani Baburajan K