BT Earnings: Cost Cuts Offset Revenue Pressures in First Nine Months

Narrow-moat BT Group is standing its ground in fiscal 2025 thanks to its cost cuts. Adjusted revenue for the first nine months declined by 3%. However, BT managed to transform this into 2% EBITDA growth thanks to cost reductions in personnel and energy. Openreach keeps losing wholesale broadband lines, but revenue keeps increasing because fiber-to-the-home lines have higher prices than the lost lines (ADSL/VDSL). Overall, the number of lost lines reached 208,000 this quarter, compared with an average of 189,000 in the previous two quarters. Our forecasts for Openreach revenue and EBITDA are not overly demanding in the long term, at a 1.4% compound annual growth rate and 1.8% CAGR, respectively, over the next decade. According to management, 80% of the lost lines are in areas where BT has no FTTH, which is why BT is trying to install them as fast as possible. We maintain our GBX 190 fair value estimate with our medium-term forecasts being slightly more conservative than company-compiled consensus.