BT Consumer’s patient transformation

Market revenue growth of 2% in Q3 was slightly lower than the previous quarter, but remained firmly positive at least.

The dual impacts of slowing broadband volume growth and consumer price sensitivity will likely hit volumes and ARPU even harder over the tough winter to come.

Inflation-linked price increases will give some operators a boost next year, but their very high levels (c.15%) will be hard to manage during a cost-of-living squeeze.

BT maintained (proforma) revenue growth at 1% in Q2, EBITDA growth was a healthy 5%, and retail net adds were solid across broadband and mobile, with evidence of an economic crisis hard to discern.

Investors have concerns around Openreach, with a market-driven slowdown in wholesale broadband, extra capex this year, and a further ‘special offer’ price cut being negotiated for next year combining to create understandable anxiety.

We think that Openreach continues to have a healthy outlook overall, with there being greater risks in consumer and business retail revenue in toughening economic conditions, albeit this is a storm that BT has weathered very well so far.

BT Group’s revenue growth surged in Q1 to 1%, the first time it has been positive in five years, with a stronger than expected boost from the April price rises partially offset by the Virgin Mobile MVNO loss.

EBITDA growth, however, actually dipped to 2%, with little operating leverage due to cost pressures, although the company is still very confident in its full year EBITDA guidance (which implies 4% growth).

BT is far from immune to macroeconomic pressures, with pressure on costs, corporate revenue and signs of a sharp dip in broadband market growth, but it is well placed to deal with them given strong growth at Consumer and Openreach.