BT results show 'new wave' growth

BT's figures show a growth in profits, despite Ofcom's warnings that some of its traditional markets are shrinking

BT has confounded its critics by boosting profits, cutting debt and maintaining its turnover despite falling revenues from its fixed-line semi-monopoly.

Pre-tax profits for the year are up 10 per cent to £2bn and revenues are almost steady at £18.5bn.

The surprise is in how quickly BT has expanded what it calls its 'new wave': mobile, broadband and ICT. This cumulatively grew at 30 percent for the year to £3.39bn, with the fourth quarter seeing contract wins in ICT alone worth £2.3bn.

Not all these wins are booked but BT was able to report new wave turnover of £1.08bn for the fourth quarter, up by 38 percent.

Chairman Sir Christopher Bland said in his statement: "The group has continued to make good progress this year and delivered strong financial results while continuing to transform the business."

Most analysts had expressed polite scepticism on BT's ability to make changes fast enough to counter the company's loss of revenue from fixed-line. Most agree, however, that the company is making the right moves.

Other highlights include cutting debt by 12 percent to £8.43bn, achieving almost 2.5 million broadband users, boosting the dividend by 31 percent to 8.5p per share and increasing cash flow.

The company is shedding staff through voluntary redundancies and many of the figures in its statement exclude what it calls "leaving costs". The scale of these will become evident later today.

A day before BT announced its annual results, Ofcom revealed the telco's shrinking revenues and market share in a market that is also contracting.

The Fixed Telecoms Market Information Update reveals that BT has slipped under the 50 percent mark for business calls revenue for the first time. It takes only 48.9 percent of the cash spent on business calls.

Its share of revenues from households has slid over 2 percent to 69.4 percent and mobiles are cutting the whole market in fixed-line telecoms, which dropped 5 percent to £12bn in 2003.

Jan Dawson, senior analyst at Ovum, said: "This is pretty predictable. BT is a pretty profitable company, but it's shrinking. It's not losing access market share but is losing call revenues. When wholesale line rental comes in this will change."

The Ofcom figures show a fixed-line market that is decreasing in size. Access revenues remain stable at £4.6bn but spending on calls in general is down 8 percent to £7.4bn. Household spending on calls dropped 5 percent to £4.3bn and business dropped their spending by 12 percent to £2.9bn.

According to Ofcom, the figures reflect the rapidly growing move to broadband.

BT recently announced that it was slashing charges for ADSL connection and that it was making a move, in concert with Vodafone, back into the mobile market.