As its latest relationship begins to blossom, BT (BT.A) has opted for a spot of spring cleaning. Management plans to rejig the telecom titan's structure following its landmark £12.5bn takeover of mobile giant EE. Coupled with a 5 per cent rise in third-quarter underlying sales to a seven-year high, the news sent shares in BT up 3 per cent.
Beginning in April, BT will comprise six divisions including EE, 'wholesale and ventures' and 'business and public sector'. The latter will combine BT's business segment and the UK-focused parts of its global services business with EE's business division. Management expects the tie-up to generate about £360m in annual cost synergies within four years, at a cost of around £600m. It also values the revenue synergies from selling broadband, landline and pay-TV services to EE customers, and selling more mobile and fixed-line bundles to consumers and businesses, at £1.6bn.
Not that BT desperately needs the boost. Strong demand for broadband, TV and mobile services drove underlying sales up 11 per cent in the key consumer segment in the last three months of 2015. Moreover, cash profits rose in four of the group's five divisions, sending adjusted operating profits up 8 per cent to £1.02bn. Prior to these results, broker Jefferies predicted EPS of 31.45p this financial year.
Below are two charts intended to provide a sense of the tie-up's scale: EE could account for more than a fifth of BT's revenue and cash profits going forward. Readers should note that we've used the two companies' financials for the six months to 30 June 2015, which are only broadly comparable.
