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BT's interims unlikely to provide much of a swan song for Gavin Patterson

If last year's schedule is any guide, BT's third quarter results will be released pretty much on the day the new boss, Philip Jansen takes over, so next Thursday's half-year results will be the last post for the outgoing boss, Gavin Patterson
Gavin Patterson
Patterson gambled large on BT being able to challenge Sky in the UK pay-TV arena

Half-year results from BT Group PLC (LON:BT.A) on Thursday will be overshadowed by the impending end of the Gavin Patterson era at the telecoms behemoth.

We already knew the chief executive was on his way and now we know when and who his successor will be. Patterson will hang around until the end of January before handing over to Philip Jansen, the former boss of payments specialist, Worldpay.

While Patterson would no doubt like to sign off on a relative high (before Jansen, in all probability, writes down the value next year of all the investments made on Patterson’s watch), the group only announced the results of its strategic review back in May, which does not leave a lot of time for Patterson to have achieved much.

The first quarter of the current fiscal year (i.e. April to June) saw adjusted profit before tax on an IFRS 15 accounting standards basis rise to £816mln from £791mln a year ago despite a fall in revenues.

The improvement came largely as a result of the company slashing costs as part of its restructuring; it would be no surprise were the new boss to swing the axe even harder next year, given that he is said to be a “corporate restructuring specialist”.

On the operational front, investors will be looking for updates in the half-year results on the company’s BT Plus package, which launched in May, and its 4G Assure service, which automatically switches business customers over to 4G if their fixed broadband service is interrupted.

READ: BT tops FTSE 100 in week of global market turmoil amid break-up speculation

The company may also inform shareholders on the progress of the UK’s first live 5G trial, which started this month in East London.

In his swan-song, Patterson may have something to say about the Department for Digital Culture, Media and Sport’s “Future Telecoms Infrastructure Review” (FTIR), which came out a day before the first quarter trading statement was announced.

The FTIR set a target of full-fibre broadband being available to all UK homes by 2033 and, encouragingly from BT’s perspective, it said it would support investment in the most difficult-to-reach areas.

BT’s Openreach division plans to replace its ageing copper lines with fibre optics to bring ultrafast broadband to 3mln homes and businesses by 2020 and is building ‘fibre-to-the-home’ (FTTH) to 10,000 premises per week.

The worrying thing for the new CEO will be recent signs that competitors are prepared to muscle in on BT’s patch and further erode what was once a virtual monopoly for the formerly state-owned telecoms firm.

Earlier this year, fibre broadband company CityFibre was taken over by a consortium of infrastructure investors after firing a shot across BT’s bows in 2017 by hooking up with Vodafone to build a new ultra-fast broadband network for 5mln homes and businesses in the UK.

Were others to follow CityFibre’s lead, cherry-picking off the most profitable part of BT’s Openreach network, that would be a worrying development for BT.

On the plus side, it appears that Liberty Global’s Virgin Media unit has reportedly backed off from accelerating the pace of adding superfast connections; in the second quarter, Virgin Media laid superfast connections to 118,000 UK premises and in a conference call to analysts management was suitably vague about its future plans for FTTH.

Finally, a dividend yield of 6.2% indicates quite clearly where the main appeal of the stock lies. The handsome dividend may be one area where the new boss will choose to “rebase” - a weasel word for “cut” - but Patterson has previously assured the City that the dividend is safe on his watch.

That being said, don’t look for anything more than the current pay-out being maintained.

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