(Bloomberg) -- The weak performance of BT Group Plc’s business unit is still causing problems for Chief Executive Officer Allison Kirkby’s turnaround plan.
BT revised its revenue forecast for the fiscal year ending in March down by 1% to 2% due to reduced sales of low-margin goods abroad and a weaker outlook in the corporate and public sector, the company announced on Thursday.
Second-quarter adjusted revenue fell 3% to £5.09 billion ($6.6 billion), compared to an average estimate of £5.23 billion by analysts in a Bloomberg survey. The results were weighed down by a 6.8% adjusted revenue decline in the unit serving business customers, which Morgan Stanley analysts led by Terence Tsui described as BT’s “problem child.”
Kirkby said the business unit’s international wing had “very much been a drag in the first half” and that the company was “internally preparing for a carve-out.” BT is looking at all options, including a full sale, partial sale or streamlining the business internally, she said during a call with reporters.
BT shares fell 5.4% to 134.30 pence at 9:42 a.m. in London on Thursday, the most in 11 weeks. Shares have risen almost 9% so far this year.
Kirkby announced an ambitious turnaround plan this year that involves focusing on the UK at the expense of international markets and cutting costs. In a vote of confidence for the new direction, India’s Bharti Global in August agreed to buy a 24.5% stake in the British telecommunications company. Mexican billionaire Carlos Slim’s family investment firm disclosed in September that it has built up a stake of 4.3%.
Adjusted earnings before interest, taxes, depreciation and amortization rose 1% from a year earlier to £4.1 billion in the first half of fiscal 2025, in line with estimates. BT confirmed its full year guidance for cash flow, Ebitda and capital expenditures.
Still, the company is losing broadband customers to so-called altnets that offer fiber plans that are either cheaper or reach areas not served by BT’s Openreach network. CityFibre, one of the largest such companies, announced a deal with Sky in August that highlighted the growing competition in the sector.
BT lost 377,000 Openreach broadband customers in the first half, a 2% decline, the company said. However, its fiber business added a record number of new customers in the second quarter.
A planned merger between Vodafone Group Plc and CK Hutchison’s Three, which got a preliminary nod this week from UK regulators if the firms agree to invest in the country’s mobile network, would also dethrone BT as the biggest operator in the UK by revenue.
(Updates with shares, CEO and analyst comments)
©2024 Bloomberg L.P.
