Market reaction to BT Broadband’s increased Q3 profits

It has been a good quarter for BT Broadband overall. The broadband giant had earlier announced that they were embarking on a new project that would be bringing fibre technology to over two-thirds of the UK. BT had dubbed the technology as Fibre-to-the-Premises (FTTP) and had announced that they would complete the deployment by the year 2015. The future of broadband, as many industry experts have said, lies in fibre technology. Various regions in the EU have begun deploying such technology actively, upgrading street cabinets and upgrading it to fiber.

So it was good news all around when BT announced that things were running ahead of schedule and that fibre deployment would be completed by 2014, one full year earlier. This is in line with the UK government’s goal of equipping the country with upgraded and superfast broadband connections. During the announcement, BT stated that the sped-up timeline “will help the government achieve its ambition of having the best super-fast broadband network in Europe by 2015.”

BT announced earlier this week that their posted revenues for the third quarter of 2011 was better than expected, obviously much to the delight of investors. The firm’s pre-tax profits were reported to be £552 million, which was 36% higher than the posted figures last 2010. The increase in revenue was largely due to BT’s aggressiveness in signing on new clients to their broadband subscription plans and services. A total of around 166,000 new retail broadband retail clients were added over the three-month period.

Investec analyst Morten Singleton stated that the results were strong across the board and that BT was “proving to be the resilient port in the storm.” Singleton explained: “If we are being picky, we would highlight the BT business revenues (down 5%) in BT Retail as being a little disappointing – but this relates to weakness on low-margin hardware, and hasn’t hurt overall BT Retail numbers, which still exceeded consensus. The order book, at £1.4bn, was only reasonable, but comes in against a tough comp that included a major contract extension.” He also added: ”Of particular note is the 63% share of broadband net adds (we venture TalkTalk may have had another poor quarter of declines), and BT has maintained the positive fixed line connections.”

Head of equities at Hargreaves Lansdown, Richard Hunter, stated: “The reiteration of full-year guidance has been well received, underpinned by particular strength in broadband and at its once beleaguered Global Services Division.”

Director of equities and derivatives at Guardian Stockbrokers, Atif Latif, also commented: “Headline numbers ahead of expectations, solid numbers in a tough market with cost cutting still in line. The free-cash-flow is more than we anticipated and with the cost cutting programme and deleveraging will continue to improve the cash situation. Full year results in line with or ahead of our outlook for the year.”

Source – Yahoo