BT hit all its targets for the 2022/23 financial year, ending the year with a (predicted) consumer service revenue growth slowdown but a surprisingly strong B2B performance fully compensating.

Investors were disappointed in the outlook for cashflow in 2023/24, with tax benefits being absorbed by the cost of faster-than-expected full fibre adoption, ignoring that this is good news rather than bad.

Next quarter the company will get a substantial boost from the price rises, and in the longer term an even more substantial boost from the completion of the full fibre build is looking increasingly secure.

Headline inflation-busting price increases of 14% mask effective increases averaging a sub-inflation 8%, due to their limited scope across the customer base and over time.

The high headline increases have led to attacks from political and consumer groups, we would argue unfairly, and may yet drive reputational damage.

Looking forward, inflationary increases may be banned, but we would expect higher fixed increases to replace them, and micro-regulating pricing structures does tend to result in unintended consequences.

Providing home broadband connections via a mobile network (FWA) is gaining traction in certain markets where local conditions make it a viable alternative to fibre, such as New Zealand, Italy and the US.

FWA is a time-limited opportunity for most, with mobile traffic growth absorbing capacity for it and fixed traffic growth depleting the economic case. An ultimate shift to fibre is the best exit strategy.

In the UK, H3G's spare capacity could support up to 1 million FWA customers on a ten-year view—enough for a meaningful revenue fillip for H3G, but not enough to seriously disrupt the fixed market.

BT’s revenue and EBITDA growth fell in the December quarter, with consumer broadband in particular suffering from weakening volumes and ARPU, as last year’s price rise benefit wanes and broader macro pressures hit.

Openreach, however, had an improved quarter, with the broadband market returning to growth, full fibre build and take-up progressing at or ahead of expectations, and the altnet threat fairly subdued.

Inflationary price rises in April will give a temporary fillip, and likely help drive a decent 2023/24 for Group financials, but it will take much longer for full fibre benefits to really be felt.

Telcos are pressing the EU to force big tech to make a ‘fair contribution’ to their network costs, although this has drawn opposition from telecoms regulators, who rightly fear risks to the wider ecosystem

There are valid concerns to address however, with content providers not currently incentivised to deliver traffic efficiently, and telcos constrained by net neutrality rules from doing anything about it, resulting in unnecessary costs and service degradation

However, there may be better ways to address these, through reforming the implementation of existing rules to encourage more efficient content delivery, and allowing the telcos to provide enhanced delivery routes of their own, with Ofcom’s approach in the UK a step in this direction, but perhaps not a step far enough

BT Group revenue growth dipped to -1.5% from an instance of rare modest positive growth in the previous quarter, albeit mostly due to a predicted price timing effect in Consumer and revenue growth predictably going from bad to worse in Global Services

The bright spots were continued strong 4% revenue growth at EE, with an acceleration in mobile-related revenue also helping other divisions, and strong growth of 5% in external revenues at Openreach driven by accelerating fibre adoption by competitor customers

A number of very important regulatory/policy/legal issues remain unresolved, including 5G spectrum auction rules, leased line pricing, FTTC pricing and FTTP roll-out rules, but without a number of these going BT’s way the outlook remains tough for at least the next 18 months

BT Group revenue returned to growth, at least temporarily, helped by overlapping price rises in consumer, one-off regulated price cuts on leased lines annualising out, and mobile handset sales improving

Regulatory news was unusually positive, with Openreach taking the initiative on FTTP, and BT winning an appeal against damaging leased line regulation, which may end up being significantly eased

BT continues to do well in consumer and struggle in business markets, with the ongoing deceleration in the consumer broadband market the main cloud on the horizon

21st Century Fox’s (21CF) second attempt to acquire Sky comes at a time when the TV world faces mounting online pressure, accompanied by erosion of territorial boundaries in an increasingly global marketplace 

Despite some investor concerns about Sky’s ability to deliver its operating targets over the next five years, we consider the underlying business to be sound and starting to show benefits that derive from its international scale 

21CF’s bid has a strong strategic logic in terms of growing international scale further and evolving a global platform that integrates shared content strengths in sports and entertainment with Sky’s top of class expertise in customer relationships 

BT had a solid enough quarter, with revenue and EBITDA growth dipping due to pre-warned temporary factors, consumer continuing to outgrow business, and very solid operating trends evident, especially in high speed broadband and mobile

This has of course been entirely overshadowed by the profit warning, with prospective weaknesses in UK public sector and international corporate of far more concern than the contained, albeit surprising, accounting irregularities in Italy

BT has a large share of revenue and a much smaller share of profit from corporate/government data network/IT services, which are erratic in nature and arguably in long term decline in their current form, and without major changes they will continue to be so