BT weighed down by problems at Global Services business
By Paul Sandle
LONDON (Reuters) - BT Group's (BT.L) quarterly earnings were dragged down by continuing problems at its Global Services division and higher costs for pensions and sports rights, sending shares in the troubled telecoms company to four-year lows.
Chief Executive Gavin Patterson said BT's consumer operations -- home broadband and mobile network EE -- performed well over the three months but that was not enough to offset pressures in its operations serving business and governments.
Shares in the company, down 30 percent in the past 12 months, fell 3 percent to 252.5 pence by 1515 GMT as analysts noted that the company had signalled that investment in the business would be prioritised over the dividend payout.
It maintained the interim dividend at 4.85 pence per share.
Patterson said some investors might have been holding out for more.
"If that's the case, so be it, (but) ultimately we are very confident of our position going forward," he said.
Patterson, in the job since 2013, said BT was taking "robust action" to turn around Global Services, which has suffered a slowdown in demand from multinationals and was hit by an accounting scandal in Italy in its last financial year.
A restructuring of the operation, announced in May, was progressing well, he said, adding that 1,600 people had already left the business and a further 1,500 roles would be cut in the second half.
NEW CHAIRMAN, FAMILIAR ISSUES
Global Services is not the only problem that Patterson and new chairman Jan du Plessis have to tackle.
BT needs to address a pension deficit that stood at 7.7 billion pounds at the end of September while generating cash to keep buying sports rights, invest in network upgrades and fulfil a pledge to maintain a progressive dividend policy.
Patterson acknowledged it had been a difficult period for BT and the company still faces challenges.
"But I am confident we are doing the right things, we have strong support in the boardroom, including the new chairman, for the strategy and support for the management team, including me," he said. "We will get through this."
Patterson said the group was maintaining its outlook for the financial year and its dividend policy.
In future the half-year payout will be 30 percent of the previous final dividend, a change that Patterson said made sense for a capital-intensive business, denying that it represented any change in how the board viewed the shareholder payout.
SPORTS BATTLE
BT's television service, which is anchored on European Champions League and English Premier League soccer coverage, had a weak quarter.
The company, which pulled in 7,000 net new subscribers compared with 63,000 a year ago, has spent heavily on sports rights to shore up its wider business against competition from Sky (SKYB.L).
It agreed in March to pay 1.2 billion pounds to retain Champions League rights from 2018-2021, while its current three-year Premier League deal costs 960 million pounds.
Patterson said the customer figures partially reflected a quieter broadband market, and the decision to charge all its customers for the service. Some broadband customers had previously received sports channels within their package.
BT said it added 279,000 contract mobile customers in the quarter, in line with the same period a year earlier, and 179,000 fast-fibre broadband connections.
The total number of fibre connections on its Openreach network, which supplies connections for other providers as well as BT, rose by 505,000 to 8.6 million.
The company, Britain's biggest telecoms company, reported adjusted core earnings of 1.81 billion pounds for the three months to Sept. 30, slightly ahead of forecasts, on revenue down 2 percent at 5.95 billion pounds.
(Editing by Keith Weir and David Goodman)
