British telecoms giant BT has managed a small rise in third-quarter core profits, relying on cost cuts and lower regulatory charges to offset falling sales, with broadband a rare bright spot on the demand side.
BT, which has increasingly relied on deep cuts and operational efficiencies in recent years as its fixed-line business struggles, said both earnings and cash generation for the three months to end December were up, despite a further 5% fall in revenues.
In added 146,000 new retail broadband customers, however, representing 56% of all net additions in the market, confirming its position alongside BSkyB as the main provider of broadband in Britain.
Take-up of its super-fast BT Infinity broadband product increased, with 95,000 customers added in the quarter, taking the base to more than 400,000 customers.
The group also repaid over £1 billion of debt in the period, but its pension deficit jumped to £4.1 billion, reminding investors that cash and the company's ability to raise its dividend could be constrained for some time to come.
"We have delivered another quarter of growth in profits and cash flow despite the economic headwinds," chief executive Ian Livingston said.
BT, which competes with Virgin Media, TalkTalk and other corporate providers, has been steadily recovering after profit warnings in 2008 and 2009 over the poor running of its corporate Global Services division, and has also invested heavily in new fibre networks.
The group posted third-quarter revenues down 5% at £4.77 billion, slightly below forecasts and down on the previous quarter, but the group said that was due to timing issues on some contracts and it remained on course to meet its full-year sales forecast.
Due to continued strong cost control, core earnings were up 3% at £1.5 billion, in line with forecasts. The group said it now expected to exceed its target of £6 billion of adjusted core earnings one year early.
