BT shares soar by almost 10% as free football on TV hits back of the net
Friday 10 May 2013
BT shares today soared 9.5 per cent to a six-year high as annual profits rose to £2.5 million and City analysts hailed the telecoms giant’s new “free football with broadband” TV offering as a “masterstroke”.
Profits before exceptional items were up a fifth in the year to March and chief executive Ian Livingston reassured investors he can increase profits and the dividend again next year despite his TV price war with BSkyB.
Analysts said BT’s decision to offer 38 Premier League football games a season for free to broadband customers paying as little as £10 a month is a big threat to rivals.
Shares in Sky and TalkTalk fell sharply yesterday when the news was first revealed.
“This is an aggressive move by BT and will help the company defend its existing broadband base,” said Espirito Santo bank, referring to how BT has lost customers.
Berenberg bank described it as a “masterstroke” and argued BT could “at least recoup its outlay on content” if it won back around 5 per cent of lost customers and persuaded 10 per cent of its existing base of five million-plus broadband customers to upgrade to better services.
Livingston would not reveal his targets after the Evening Standard asked if he was aiming to gain one million customers within a year.
BT has 810,000 TV subscribers at present while Sky has 10.4 million.
Sky has criticised BT for using free sport as “a marketing gimmick to promote another product” amid suggestions that it devalued TV rights. But Livingston hit back. “Sports rights holders will be very pleased about bringing sport back to the people for free, rather than insisting on them paying £70 a month,” he said in a swipe at Sky.
“They are talking about sports rights holders. We talk about customers.”
Some analysts remain sceptical about BT’s £1 billion-plus foray after Setanta and ESPN failed against Sky.
Edison Investment Research warned BT’s profits could be hit in the long term. Annual sales fell 5% to £18.25 billion as regulation pushed down on prices but Livingston cut costs faster.
Underlying sales were flat in the last quarter. The dividend is up 14 per cent at 9.5p.
He plans a further £400 million of cuts but no compulsory redundancies.
The pension deficit jumped to £4.5 billion but that was not as bad as analysts feared.
The shares soared 26.3p to 301.9p.
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