Investors have been getting a kick out of BT (BT.A) for 15-months straight. The shares have gone from 217p in October 2012 to 380p, having added 2.5% today after decent-looking third quarter numbers. Revenue of £4.6 billion may have risen a mere 2% year-on-year, yet after long period of stagnation, any return of growth will get stock market red carpets rolled out.


A better performance in Global Services and strong Retail underpin the results, and it is this last area where headlines have been written lately. The Retail division has clearly sustained its momentum beyond the exciting summer spell and the launch of BT's new Sports TV channels on the back of 38 'live' Premier League games for this and the next two seasons.


If you need reminding of the detail, here's what we wrote back in May. Since then, BT has rolled the dice once more, trumping Sky for exclusive coverage of European club games. The results in the third quarter are (on a net basis) broadband adds topping 150,000, with 228,000 fibre net adds, equivalent to a market share of 60%, according to analysts at broker Killik & Co. TV net adds came in at 53,000, more than doubling year-on-year.

BT GROUP - Comparison Line Chart (Rebased to first)

Quarterly free cash flow (FCF) of £554 million looks at first glance a bit light against consensus £615 million estimates, although this almost exactly matches up when you consider the extra £60 million deposit paid out for recently won European football rights. Overall FCF expectations for the full year remain at about £2.3 billion.


The blot on BT's copybook is on the wholesale side and into the public sector, an area increasingly targeted by a growing number of nimble mid-market, network agnostic suppliers not carrying legacy baggage in the manner of BT. This area might get tougher still down the line with new government rules designed to loosen the grip of large integrator suppliers over public services contracts and embrace the UK's burgeoning SME space. How this transition is handled will be among the challenges facing BT chief executive officer Gavin Patterson, promoted from Retail division boss to the top job in September.


But that's for the future, right now attention is firmly fixed on Retail, nailing down customer churn, wooing broadband/calls subscribers from rivals (Sky and Virgin in particular) with a feast of football. It's a policy that's worked wonders for Sky over two decades, so seeing into whose hands the next Premier League potential £1 billion-a-year plus rights packages fall, possibly late this year, will make for fascinating viewing.

Issue Date: 31 Jan 2014