BT Group’s Earnings Call: Strategic Gains Amid Challenges

Bt Group Plc (Bt.A) (($GB:BT.A)) has held its Q2 earnings call. Read on for the main highlights of the call.

BT Group’s latest earnings call painted a picture of strategic progress, marked by impressive achievements in fiber and 5G coverage, alongside significant cost savings and customer base growth. Despite these advancements, the company faces challenges such as declines in legacy revenue, pressure on consumer ARPU, and the need for international segment restructuring. These challenges are being addressed through strategic initiatives and restructuring efforts.

Record Fiber Build and Take-up

BT Group’s Openreach division achieved a new milestone by passing 2.2 million homes with full fiber, connecting a record 1.1 million customers. The take-up rate has reached a market-leading 38%, showcasing the company’s strong position in the fiber market.

5G Coverage Expansion

EE, a part of BT Group, expanded its 5G+ coverage by 23 percentage points, now reaching 66% of the U.K.’s population. The company aims to cover 99% by fiscal year 2030, demonstrating its commitment to leading in the 5G space.

Cost Transformation Progress

BT Group has made significant strides in its cost transformation efforts, achieving GBP 1.2 billion in annualized cost savings within the first 18 months of a five-year program. This progress is particularly notable in the networks and digital units.

Consumer Base Growth

The company reported growth in its consumer base across all key segments, including broadband, mobile, and TV. This marks the third consecutive quarter of broadband base growth, highlighting BT’s success in attracting and retaining customers.

International Restructuring

BT Group has agreed or completed four targeted disposals outside the U.K. and carved out its international business, accelerating its reshaping efforts. This move is part of the company’s strategy to streamline operations and focus on core markets.

Legacy Voice Revenue Decline

The company faced a reduction in legacy voice revenues by approximately GBP 100 million, impacting overall revenue. This decline underscores the ongoing shift away from traditional voice services.

Consumer ARPU Pressure

BT Group’s consumer service revenue decreased by 1% due to a decline in ARPU, driven by competitive markets and a reduction in legacy voice revenues. This pressure highlights the challenges in maintaining revenue growth in a competitive landscape.

International Revenue and EBITDA Decline

International revenues fell by 9% due to declines in legacy products, foreign exchange impacts, and divestments. EBITDA also declined by 27%, reflecting the challenges in the international segment.

Challenges in Broadband Market Growth

The U.K. broadband market remains flat to slightly down, with housebuilding below government targets impacting growth. This stagnation poses a challenge for BT Group’s growth ambitions.

Forward-Looking Guidance

BT Group provided comprehensive guidance for the coming years, reaffirming its financial targets. For fiscal year 2026, the company anticipates revenue of around GBP 20 billion, with U.K. service revenue between GBP 15.3 billion and GBP 15.6 billion. Adjusted EBITDA is expected to range from GBP 8.2 billion to GBP 8.3 billion, with a planned GBP 5 billion investment in CapEx. BT aims for a normalized free cash flow of approximately GBP 1.5 billion, targeting GBP 2 billion next year and GBP 3 billion by fiscal year 2030. The interim dividend is set to rise by 2%, reflecting confidence in sustained growth and financial stability.

In conclusion, BT Group’s earnings call highlighted a blend of strategic achievements and ongoing challenges. The company’s strong performance in fiber and 5G expansion, coupled with cost savings and consumer growth, is tempered by declines in legacy revenues and international restructuring needs. Looking ahead, BT’s guidance underscores its commitment to growth and financial stability, with ambitious targets for revenue, EBITDA, and free cash flow.