BT Global Services hit by lower public sector revenue

BT’s Global Services (BTGS) business has reported a five percent fall in revenue due to a continuing decline in UK public sector contracts.

A public sector partnership to end recently for BT was one it had with Liverpool Council to provide call centre, benefits and ICT services to the local authority. The contract came to an end after BT refused to offer price reductions of more than £5 million a year on the £70 million-a-year contract.

But despite the fall in revenue, from £3.48 billion in the half year to 30 September 2013 to £3.28 billion the same period this year, BTGS’ profit increased by 38 percent from £127 million in 2013 to £175 million this year.

Order intake down

BTGS said that its total order intake at £1.3 billion was down 14 percent because it had signed a large contract renewal with Unilever the previous year. However, the order intake was £6.1 billion on a rolling, 12-month basis, which was also down 14 percent.

Nonetheless, the company said it signed a number of major contracts in the period, including with Interserve in the UK for communications solutions, Deutsche Post DHL for managed communications services to connect 1,100 sites in 28 countries across Asia Pacific and with Societe Generale for voice and data communications across 30 countries.

It also signed a multi-million pound, seven-year deal with the Welsh Government to operate the Wales-wide public sector broadband network, as well as a £130 million, five-year contract with Royal Mail to deploy hand-held technology to postmen and women, this quarter.

BTGS’ performance contributed to an overall BT Group profit increase of 10 percent to £1.3 billion for the half year to 30 September, but as analysts from TechMarketView pointed out, it was BT’s consumer activities that “held centre stage”.

“Inside BTGS, UK public sector revenues declined but growth in international operations compensated with new contracts in managed voice and data services. Underlying EBITDA was up five percent. New products in security and managed cloud-based storage are also welcome. Additional investment is under way in new international Points of Presence to improve margins on internet and ethernet traffic.

“Nevertheless, with capex down a further seven percent year-on-year, this is hardly the action of a management priming a potential growth engine to diversify longer term sources of profit,” said TechMarketView analyst Peter Roe.

“We still consider that the BT top team need to re-examine its approach to BTGS, providing additional resources to develop repeatable and scale propositions with relevance to specific verticals. Without this, BTGS will find life increasingly difficult.”

Copyright © 2014 IDG Communications, Inc.

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