Broadband boom boosts BT's profits

New wave services are picking up as BT's traditional revenues tail off

BT surprised the City on Thursday morning by announcing third-quarter figures that were better than analysts had predicted.

In the three months to 31 December, 2005, the telecoms giant achieved an profit before various deductions of £1.38bn, a slight drop on the £1.4bn it brought in during the same quarter in 2004. Total income rose to £4.95bn, compared to £4.58bn in Q3 2004.

Analysts had expected profits of £1.36bn from revenue of £4.87bn.

As in previous quarters, the broad theme of BT's results was a sharp increase in revenues from services such as broadband, in tandem with a decline in income from traditional telephony services.

The new wave revenue rose by over 40 percent to £1.6bn, which included over £1bn from networked IT services. But this was this was more than counterbalanced by lower figures elsewhere in the business as customers choose other telecoms providers or abandon profitable legacy technologies like ISDN.

BT announced that by the end of last year it was supplying 6.9 million broadband connections, and had added 2.8 million customers during 2005. This indicates that the UK's love affair with high speed Internet access is still rosy.

However, BT's share of the retail market was just 31 percent, as rivals such as AOL, Wanadoo and Virgin are providing effective competition in the retail sector.

Speaking to journalists on Thursday morning, BT's chief executive Ben Verwaayen denied reports that BT was planning to buy Pipex. Pipex owns a licence to operate wireless services at 3.5GHz, a frequency used for WiMax.

Verwaayen, though, pointed out that BT could acquire other spectrum to operate WiMax services if needed.

BT revealed that its Fusion product, a converged fixed and mobile handset, now has 13,000 customers. Earlier this week BT launched a version of Fusion for small businesses.

The telco also plugged its plans to launch a product called BT Hub during 2006 that would "enable wireless networking for all the family's PCs and laptops, next generation TV, voice calls over broadband, video telephony, high definition voice, monitoring services and remote diagnostics."