BT Global Services remains loss making

BT has reported a 37 percent increase in pre-tax profits for the half-year, although its Global Services outsourcing division remained loss-making.

BT Global Services total orders were down significantly in the final three months of the half year at £1.4 billion, compared to a £2.1 billion figure last year that benefited from a £640 million contract extension with the Ministry of Defence on the Fixed Telecommunications Service agreement.

The division's operating loss was £31 million, although this was reduced by 24 percent.

Contracts signed in the period included a deal with Best Buy Europe to provide a wide area network transformation to 820 stores, and a contract with CLSA Asia Pacific Markets, one of Asia’s leading independent brokerage and investment groups, to provide voice, data and trading systems solutions across 14 countries.

BT also expanded its contractual relationship with Novartis, adding new services and connecting new global locations. In addition it signed a major networked IT services contract in Australia’s health sector in partnership with Serco.

"Capital expenditure increased by 25 percent principally due to a change in certain customer contract commitments in the quarter", said BT. The government has put BT and other suppliers under pressure to cut costs on the public sector contracts they hold.

For the six months ending 30 September, BT Group posted overall sales of £9.7 billion and pre-tax profits of £1.06 billion. Ian Livingston, BT chief executive, said: "We have increased cash flow and profits in the quarter. This progress has been supplemented with positive operational performances in most of our businesses. We achieved a market leading 63 percent share of broadband net additions.

BT said it was "accelerating our fibre roll-out programme to cover two-thirds of the UK by the end of 2014". It recently announced it would be hiring an extra 520 engineers - mainly ex-forces - to speed its fibre broadband roll-out. Although BT is still battling to reduce a massive black hole in its pension fund, it has no choice but to invest to keep up with new communications demands both in the UK and where it competes globally.

BT said it now has six million vanilla broadband customers based on copper wire DSL (digital subscriber line) technology, and that the number of BT Infinity faster fibre-based subscribers doubled to 300,000 in the last six months.

As for BT Vision, the TV box system that relies on a Windows CE operating system interfacing with the internet, BT said "net subscriber additions were the highest for more than two years at 41,000" in the second quarter.

The company is currently in the middle of a major advertising and marketing campaign for the BT Vision package, but there is still no news as to when the BT Vision boxes will be able to support HD TV channels, something that has put some customers off from subscribing to the service.

TechMarketView analyst Phil Codling said of the results: "BT’s Q2 results reveal a good performance on signing up broadband customers, but the picture on services revenues and wins is less convincing.

"BT Global Services is still loss-making and the order intake looks below par, especially given BT's exposure to good growth opportunities in places like Asia Pacific and increasingly Latin America."

Copyright © 2011 IDG Communications, Inc.

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