BT revenues slip, but investment indicates long-term vision
BT shines in its consumer business and it also shares some enticing 5G news for the UK
British Telecom's (BT) yearly financial overview revealed the company is facing serious challenges in an unfavourable telecoms market as revenues slip for the entire year.
The company is facing revenue losses in all areas of the business except for consumer which continues to shine, but despite the adversity, the new CEO Philip Jensen has maintained the company's dividend as well as profits.
The main challenge presented by to the fixed-line telecoms giant is the decline in traditional landline calls, a market which BT has a high market share.
The shift is going towards mobile and things like voice over IP calls (VoIP), a trend in which BT doesn't expect any degree of slowdown. This trend contributed to a 12% revenue decrease in its enterprise business.
One positive takeaway from the grim-ish news is that BT thinks that enterprise opportunities are abundant and it continues to see high demand for its premium fibre products and 4G assure - its broadband and 4G network hybrid product.
The longstanding British telco also sees new technologies such as Internet of Things (IoT), cloud, SD-WAN and security as good long-term opportunities on which it can capitalise.
BT admits that greater investment is needed in order to seize the opportunities in the mobile-centric markets where its presence isn't currently overly prominent.
The surge of investment will almost certainly impact the company's revenue figures again in the short-term but could prove pivotal after entering a far more profitable market.
"The new CEO has some tough decisions to make which will cause further disruption," said telecoms analyst Paolo Pescatore. "This will hamper its ability to grow in the short term."
Jensen's main focus going into the next year is to double-down on its fibre rollout, raising its target from reaching 10 million to 15 million premises by the mid-2020s while maintaining the company's dividend, with the caveat of the right conditions set by regulators.
"Our aim is to deliver the best converged network and be the leader in fixed ultrafast and mobile 5G networks," said Jensen. "We are increasingly confident in the environment for investment in the UK."
While 5G is likely to take-off quickly and receive much excitement, many analysts predict that it will not be the fibre-killing disruptive tech that some believe to be the case.
The technology isn't with us yet, but in the next decade, we will most likely see fibre networks becoming much more advanced and powerful than 5G ever will be, so investing in fibre now is a sign of BT's long-term vision for market supremacy.
"We need to invest to stay ahead in our fixed, mobile and core networks, and we need to invest to overhaul our business to ensure that we are using the latest systems and technology to improve our efficiency and become more agile," said Jensen.
"For 2019/20, we expect adjusted revenue to be down around 2%," read the report. "This is mainly as a result of the challenging market conditions, regulatory pressure in both fixed and mobile markets, and the ongoing impact from our decision to de-emphasise lower margin products, particularly in our enterprise businesses."
BT has managed to mitigate the detrimental effects of regulatory pressure and unfavourable market trends by cutting operational costs and jobs under a program initiated by the former CEO Gavin Patterson who departed the post in February.
The consumer division continues to carry the company forward and should expect to see some further heightened interest as it announces that EE, BT's mobile carrier arm, will launch 5G in six cities "imminently" and that the carrier is on-track to deliver on its 16-city promise by the end of the year.