BT Profits Crash Amid Italian Accounting Scandal And Slowing Business Demand

BT’s consumer broadband and mobile divisions enjoyed a strong third quarter, but this performance was overshadowed by a write down caused by an investigation into improper accounting at its Italian business and weak predictions of business and UK public sector demand.

The company added 86,000 entirely new (copper and fibre) customers during the three month period and added 260,000 broadband users to its fibre network. That accounted for 52 percent of the record 498,000 users added to the Openreach fibre network by all providers.

There are now 7.2 million connections to Openreach’s fibre infrastructure, representing 27 percent of the 26 million premises covered. BT said it was now looking at ways of furthering coverage and its plans for the rollout of ultrafast using G.Fast and fibre to the premise (FTTP) technologies.

BT broadband

On the mobile side of things, BT now has 30.2 million mobile customers across EE, BT Mobile and Plusnet Mobile, boosted by 276,000 new additions. The company said it was on track to meet its targets of 92 percent geographical coverage by September and 95 percent by the end of 2020.

Revenue was up 32 percent in total, partly thanks to EE’s contribution, but pre-tax profits were down 37 percent to £526 million.

And there are problems on the horizon. In addition to the ongoing debate about the future of Openreach, BT has the uncertainty of Brexit to contend with and the consequences of the internal investigation in Italy, which has resulted in a £513 million writedown.

“The good progress we’re making across most of the business has unfortunately been overshadowed by the results of our investigation into our Italian operations and our outlook,” lamented CEO Gavin Patterson.

“I am deeply disappointed with the unacceptable practices by some that we’ve found. This has no place at BT, and it undermines the good work we’re doing elsewhere in the Group.”

This, combined with a negative outlook for business and public sector, means BT expects a “double digit” decline in growth next quarter and for revenues to be flat. BT recently announced price increases for broadband customers and the end of its free BT Sport offer.

It is also preparing for a potentially costly battle to retain UEFA Champions League football broadcast rights amid expected competition from Sky.

“We face a more challenging outlook in the UK public sector and international corporate markets but we’ve seen record growth at EE, strong momentum in Consumer, and our highest ever fibre net connections in Openreach,” added Patterson, who also noted improvements in customer service.

“We are pushing ahead with reforms at Openreach, particularly on governance and customer service and continue to believe an agreement can be reached with Ofcom on its Digital Communications Review. We think these changes address Ofcom’s concerns and can form the basis for a fair, proportionate and sustainable settlement.”

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