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BT's pandemic pressures are not perpetual

Covid-19 has weighed on profits, but demand for high speed internet has buoyed Openreach
BT's pandemic pressures are not perpetual
  • Pandemic pressure on consumer businesses 
  • Record demand for high speed internet  

BT (BT.A) saw its pre-tax profits drop by almost a fifth to £1.59bn in the nine months to December, as coronavirus weighed on both its consumer and enterprise businesses. 

Fixed average revenue per customer was down 5.8 per cent year on year, partly because of declining voice usage and long term investments. But demand for high-speed internet connections during lockdown meant that Openreach was the only consumer-facing unit that posted revenue growth in the period. The division reached 4.1m households with fibre broadband (or fibre-to-the-premises, ‘FTTP’). Management noted that it was on track to achieve its 4.5m target by next month. 

This was no doubt helped by increased fixed and mobile network investment, which pushed capital expenditure up by 5 per cent to £3bn. BT said that all of its major communication provider customers were now selling FTTP products, with strong sales in the third quarter meaning Openreach hit a record 17,000 orders per week. 

Despite a 7 per cent stumble in revenue, management reiterated that it still expects cash profits between £7.3bn-£7.5bn for the 2020/2021 financial year. The shares have lagged since the start of 2021, down 6 per cent. But there could be some catalysts on the horizon: regulator Ofcom is expected to publish new rules in the Wholesale Fixed Telecoms Market Review (WFTMR) in April, which will outline how much profit BT can make on its £12bn fibre network investment. Investors will also be watching for the triennial review of its troubled pension fund, which is due in the first half of this calendar year. 

Compare the third quarter update with BT's close peer Vodafone, here.