More on BT
BT: 2006 results
BT’s growth picked up in the last quarter of the financial year with organic growth of 5% and another 2% from acquisitions. Organic growth in “new wave” (BT’s term for non-POTS services) revenues remained strong at 23% more than offsetting the 3% decline in BT’s traditional (POTS) business.
BT is showing signs of regaining share in markets where it has previously been weak. Because business telecoms were opened up to (effective) competition long before consumer telecoms, BT’s business market share is much lower at a little over 40%, compared to about 62% of the consumer market.
Over the year revenues from major corporate customers rose 14% (9% organic) in the fourth quarter and revenues from SMEs fell 2% while consumer revenues fell 4% - giving BT overall positive growth in business telecoms. This is despite much stronger growth in new wave consumer revenues.
BT’s biggest problem at the moment is falling prices as the consumer market becomes more competitive. Revenue per household (the fixed-line equivalent of ARPU) was almost unchanged despite 45% growth in new wave services. Of course some of these new wave services are cannibalising existing businesses - ADSL is damaging both directly dial-up internet and allowing VOIP operators into the market.
Despite the pressure on prices BT is still at least managing to maintain its profits. Pre-exceptional EBITDA rose 1%. Although adjusted EPS rose 8% for both the quarter and the year this was the result of the fortuitous combination of a number of factors (tax, finance costs, etc.) and we would not take it as indicative of the long term trend.
Even assuming that BT is going to be broadly stable it still looks like reasonable value on a PE of 11× with a 5.5% yield.
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