BT loses share of broadband

BT Group has lost one-sixth of its share of growth in the retail broadband market in the second quarter in the face of increased competition. However, the group still managed to produce a strong 26 per cent rise in first-half pre-tax profits to £1.24 billion.

BT's share price plunged by nearly 3 per cent to 283.75p following the results, although some analysts predicted the strong performance would spark a round of profit upgrades.

BT has faced increased competition from cut-price offers from the likes of Carphone Warehouse and BSkyB. The group reported that its share of growth in broadband provided via phone lines fell from 30 per cent in the first quarter to 25 per cent in the second quarter.

Its total share of the whole broadband market slipped from 24.46 per cent to 24.3 per cent in the second quarter.

The former British telecommunications monopoly produced a 3 per cent first-half increase in revenue on last year to £9.8 billion, ahead of market estimates. This was driven by a 20 per cent rise in new wave businesses which include its broadband internet and corporate networked IT services.

BT said the 26 per cent rise in pre-tax interim profits including one-off items was bolstered by greater operational efficiencies and lower net finance costs. However, this was partly offset by increased investment in its burgeoning new wave operations, which are making an increasing contribution to profits as its fixed-line telephony business declines.

Ben Verwaayen, chief executive of BT, said the result was "another strong team performance with every part of the business playing its part". "We have announced today that BT Retail has passed 3 million broadband connections in a fast growing market," Mr Verwaayen said.

One-off items for the first half were £3 million. This including £23 million in office rationalisation costs which were largely offset by a £20 million gain from the sale of its partial disposal of an interest in an associated undertaking.

BT also announced it would pay an interim dividend of 5.1p, up 19 per cent on last year.

Jonathan Groocock, an analyst at Oriel Securities, described the result as "a very robust set of figures" and predicted that a round of "profit upgrades would start to come through".

Richard Hunter, head of UK Equities at Hargreaves Lansdown Stockbrokers commented, "There are a number of positives which surround today's numbers - the simple fact that profits are rising at a parlous time within the telecoms sector."

"Concerns remain around fierce competition, particularly in broadband where BT's share of additions has dropped over the quarter, with the likes of BSkyB and Carphone Warehouse making their presence known." Mr Hunter said.

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