BT's Quarterly financial results

[Russ B]

Third Quarter Financial Results: October to December 2004

Group turnover* up 3%
New wave turnover up 35%
Profit before taxation** up 4%
Earnings per share** up 9%
Net debt down to £7.9 billion
4.1 million broadband connections at December 31, 2004
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Another quarter of strong financial results in which group turnover has grown for the fourth consecutive quarter. An impressive 35% growth in revenue from new wave services has more than offset the decline in our traditional business.

New wave business: now accounts for 25% of the group's turnover.

We are continuing to establish BT as a credible provider of networked IT services (ICT) which is reflected in Global Services' best ever results - with revenue growth of 10% this quarter. The value of new ICT contracts was £1.2 billion including Barclays in the UK, and the Thales Group in France.

Broadband remains at the heart of our portfolio, with a new customer connected every ten seconds of every day. A record 800,000 DSL connections this quarter contributed to a 21%* increase in Wholesale's external revenue.

In Retail we signed up 208,000 consumer and business broadband customers, but this accounts for only 26% of the total DSL additions. Our response is to make broadband up to four times faster, for the same price. New and existing customers will benefit from speeds of up to 1Mb for BT Broadband Basic (from 17 Feb), and up to 2Mb for BT Broadband and BT Yahoo! Broadband (from 1 April).

Turnover from mobility services increased by 112%, with BT Mobile reaching more than 341,000 post pay contract mobile connections at the end of December. Of course mobility is more than just the mobile in your hand, and we have continued to lay the foundations for fixed-mobile convergence - and the commercial launch of Project Bluephone in the Spring.


Traditional business: the rate of decline in traditional turnover continues to slow down.

Profit margins for traditional products are higher than for new wave services. But to remain competitive we must continue migrating customers to our new wave services as these will deliver the high-speed, converged communications they are coming to expect.


Revenue from fixed line calls decreased by £192 million compared with the same time last year, reflecting a loss in both consumer and business markets. Packages like BT Together and the BT Business Plan remain important tools in retaining customer loyalty.

Cost leadership: cost reduction and efficiency programmes in traditional areas generated £300 million savings, and we are on track to achieve our £400 million annual target. However, these savings are being invested in servicing new ICT contracts, and in securing new broadband and mobility customers through marketing and innovative product development.

Cash flow: net debt fell below £8 billion due to the additional £450 million received through the sale of non-core assets. Debt will be more than £8 billion by the end of this financial year as we pay the costs associated with recently announced acquisitions - Albacom and Infonet.

Allshare: we still have some way to go to meet our year-end targets on earnings per share and customer satisfaction to trigger the allshare award.

Our performance demonstrates clearly that we are continuing to invest in the transformation of our business while delivering solid financial results.