BT Group H1 Earnings Call Highlights

Key Points

• BT reported its first revenue increase in two and a half years: First-half revenue and adjusted EBITDA each rose 1%, to £8.75 billion and £4.1 billion, respectively, and the interim dividend increased 2%. Normalized free cash flow fell to £236 million, but BT reaffirmed its fiscal 2027 and 2030 cash flow targets.
• Full-fibre growth is advancing amid consumer competition: Openreach passed more than 24 million premises and connected its 10 millionth full-fibre customer after the half-year. Broadband revenue per customer remained under pressure, while consumer EBITDA fell 1%.
• TalkTalk adds near-term cost and uncertainty: BT’s acquisition is awaiting regulatory review, and the company estimates it will cost around £400 million in fiscal 2027. Separately, BT delivered £312 million in gross annualized savings during the first half.

BT Group LON: BT.A reported its first increase in total revenue in two and a half years and reaffirmed its cash flow targets, even as competitive pressure weighed on broadband revenue per customer and its acquisition of TalkTalk awaited regulatory review.

Revenue rose 1% to £8.75 billion in the six months ended Sept. 30, while adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, increased 1% to £4.1 billion. The company raised its interim dividend by 2% to 2.5 pence per share.

Chief Executive Allison Kirkby said BT was making “strong and disciplined progress” on its strategy. The company maintained its forecast for approximately £2 billion in normalized free cash flow for fiscal 2027, excluding the impact of TalkTalk, and around £3 billion by fiscal 2030.

Cash flow and spending outlook

Normalized free cash flow fell to £236 million in the first half, approximately £300 million less than a year earlier on a continuing operations basis. Chief Financial Officer Patricia Cobian attributed the decline to the timing of an Ofcom decision on broadband anchor pricing, receivables timing and repayment of working capital financing.

Cobian said first-half cash flow is typically lower than in the second half because of billing cycles, bonus payments and the timing of capital expenditure. BT expects lower cash capital spending and some EBITDA growth to drive full-year cash flow improvement.

For fiscal 2027, BT continues to forecast revenue of £17.1 billion to £17.6 billion and adjusted EBITDA of £8.1 billion to £8.2 billion. Reported capital expenditure is expected to be £4.2 billion to £4.3 billion. The guidance treats BT International as a discontinued operation and excludes the impact of TalkTalk.

During the analyst question-and-answer session, Cobian said cash capital expenditure would be about £100 million higher than reported capital expenditure for the full year. In the first half, it was more than £200 million higher because of the timing of payments to capital creditors.

Fibre connections grow as consumer competition persists

BT’s Openreach network passed more than 24 million premises with full fibre, Kirkby said. It connected its 10 millionth full-fibre customer in October, after the half-year reporting period. The company is targeting 25 million premises by March and around 30 million by approximately fiscal 2032.

Openreach revenue increased 1% to £3.2 billion and EBITDA rose 4% to £2.2 billion. Kirkby said demand for connections had exceeded internal expectations, leading BT to prioritize installations over the pace of its network build. Broadband line losses in the half were 11% lower than a year earlier.

Consumer revenue rose 2%, helped by higher handset prices, while EBITDA declined 1% to £1.3 billion. BT grew its mobile, TV and converged customer bases, although broadband customers fell modestly. Kirkby said broadband average revenue per user was under pressure from competition and declining voice revenue, partly offset by growth in mobile average revenue per user.

Asked about the second half, Kirkby said she expected consumer EBITDA to be “fairly flattish” for the full year. In Business, revenue declined 1% to £2.6 billion and EBITDA fell 7% to £601 million, reflecting legacy product migrations and higher marketing costs. BT expects Business performance to improve in the second half.

TalkTalk, pension deal and transformation

BT bought TalkTalk out of administration on Oct. 5, after the reporting period. Kirkby said the purchase protected service for 2.5 million customers and that BT was working to stabilize the business while awaiting the outcome of a regulatory review.

BT estimates the acquisition’s cost at around £400 million in fiscal 2027. That includes consideration, transaction and administration costs, working capital effects, an expected trading loss for the remainder of the year and approximately £100 million that Openreach would otherwise have received. BT plans to provide further TalkTalk financial details after aligning its reporting policies and completing the regulatory process.

BT also reached agreement with the trustee of its pension scheme on the 2026 valuation. The company expects the scheme’s actuarial deficit to fall to around £300 million after it issues zero-coupon bonds to replace future contributions. It agreed to an additional payment in fiscal 2034 with a present value of £282 million.

Cobian said the arrangement would not change BT’s path toward its BBB+ credit rating objective because rating agencies already consider the pension deficit, which will be replaced by debt. The agreement also increases BT’s permitted annual dividend and other distribution headroom to £1.5 billion, rising to £2 billion by fiscal 2030.

On cost reductions, Cobian said BT delivered £312 million of gross annualized savings in the half, bringing cumulative savings to £1.7 billion on a basis excluding BT International. Kirkby said artificial intelligence was helping employees with tasks such as call summaries and complex bids, although the benefits had not yet scaled enough to affect the bottom line.

About BT Group (LON:BT.A)

BT Group is the UK's leading provider of fixed and mobile telecommunications and related secure digital products, solutions and services. BT Group consists of four customer-facing units: Consumer serves individuals and families in the UK; Business covers companies and public services in the UK; International serves multinational organisations headquartered outside the UK and overseas public sector customers; Openreach is an independently governed, wholly owned subsidiary wholesaling fixed access infrastructure services to its customers – over 700 communications providers across the UK. British Telecommunications Limited is a wholly owned subsidiary of BT Group plc and encompasses virtually all businesses and assets of the BT Group.

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