BT - facing an uphill battle

2nd February 2023

BT, the UK's leading telecommunications and network provider, has released results for the nine months to 31 December 2022:

Revenue of £15.6bn, down 1% as price increases and improved trading in Openreach and Consumer were offset by declines in the other divisions.

Adjusted EBITDA of £5.9bn, up 3% due to tight cost control and the removal of BT Sport costs.

Net debt increased by £1.2bn to £19.2bn
BT has reaffirmed its outlook for the full year
Charlie Huggins, Head of Equities at Wealth Club, commented:
"High inflation poses challenges to BT's business model.

Telecoms is a mighty challenging sector. There's little to differentiate providers and regulators and consumers are always demanding more for less. So while BT is pushing through price increases, it must be careful not to push too hard.

Then there are the huge cash demands - BT will spend around £5 billion this year alone to maintain and upgrade its infrastructure, and it will have to keep the spending taps open to remain competitive. If inflation remains elevated, these costs are only likely to increase.

BT’s solution to these challenges is to keep bearing down on costs - it’s aiming for about £3.0bn of cost savings by the end of FY25. The trouble is – it’s a rather blunt tool and does nothing to accelerate top line growth.

Overall, BT faces an uphill battle in the current inflationary environment, and will have to run very hard just to stand still."