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Telecoms target

BT ‘stretching resources’ with fibre and pension plans

Openreach worker

Openreach will extend the fibre network

BT’s plan to extend to its full-fibre broadband to 25 million premises over the next five years and tackle its debt and pension deficit represent ‘significant drains on its financial resources, according to key analyst.

The telecoms giant said it aims to hit its new target through its Openreach independent network arm.

The company said 7,000 roles will be engaged in the fibre roll-out.

Philip Jansen, the chief executive of BT Group, said: “BT is already building more full-fibre broadband to homes and businesses than anyone else in the UK.

“Today we are increasing our FTTP [fibre to the premises] target from 20 million to 25 million homes and businesses to deliver further value to our shareholders and support the Government’s full-fibre ambitions.”

BT Sport

BT Sport’s future was not mentioned in today’s statement

BT also said it was on target to wipe out the £8bn pension deficit by 2030.

Otto Thoresen, the chairman of the BTPS Trustee board, said a new funding solution was “fair and affordable”.

The former Aegon CEO said: “Good progress has been made since the last full valuation in 2017. The deficit-reduction plan is on track with the Scheme set to be fully funded by 2030.”

Profit before tax for the year fell 23% to £1.8 billion.

Revenue of £21.33bn is down 7%, primarily due to the impact of Covid-19 on consumer and our enterprise units, ongoing legacy product declines and divestments, partly offset by higher equipment revenue and Openreach bases in fibre and Ethernet.

As previously disclosed, there is no final dividend for 2020/21, but payments are expected to resume at an annual rate of 7.7p per share in 2021/22.

Market reaction

Russ Mould, investment director at AJ Bell said: “BT may feel a clearer picture has emerged as several major issues facing the business have been resolved but it seems investors don’t necessarily love what they see.

“The company effectively has three significant drains on its financial resources. These are its substantial pension commitments, the rollout of fibre broadband and funding the acquisition of content rights for its BT Sport channel.

“The latest valuation of the pension reveals a massive deficit which will require hundreds of millions of pounds worth of funding every year.

“The company’s net debt pile is also pretty eye-watering, and the surprise isn’t really that dividends remain off the table for now but that they are likely to come back in the current financial year. The UK’s new super deduction tax on capital expenditure is clearly doing a lot of the heavy lifting here.

“All told though, there should be no surprise that the company wants to bring on board a partner to help meet the costs of its expanded fibre ambitions.

“There was no mention from BT today of the sale or partial sale of its BT Sport arm which had been rumoured in April.

“However, the renewed £4.8 billion TV deal agreed overnight for Premier League rights (in which Sky and Amazon are also participants) is a reminder of the kind of outlays required to feed the BT Sport machine.”

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