BT scraps hunt for Openreach partner as fibre rollout costs fall
BT has scrapped plans to find a joint venture partner to help fund the rollout of its next-generation broadband network to an extra 5 million homes, before a potential takeover move by the billionaire investor Patrick Drahi next month.
The company said it had abandoned plans to find a partner for its subsidiary Openreach because the cost of rolling out the new network had dropped significantly, and takeup by homes and business had proved better than expected.
In May, BT announced it was upping the pace of the plan for Openreach to bring full fibre to 20m homes by 2026 by 5m, through a potential £3bn joint venture with a third party.
Bringing in a third party was viewed by some as the first step in being able to put a price on Openreach, which has once again been mooted as a potential spin-off target after Drahi’s Altice move to take a 12.1% stake in BT in June.
“We can afford to fund it ourselves,” said Philip Jansen, the chief executive of BT. “The cost of passing a home with full fibre has dropped 15%; that is a huge saving when you look at 19m more homes to reach our target.
“It is best for shareholders to have 100% control. We didn’t want to do anything to slow [Openreach] down or provide some complexity.”
The cost per home has fallen from £300-£400 to £250-£350.
Altice has said that building the stake is not part of a wider takeover plot. However, Drahi is free to make a move under UK takeover rules after 10 December. Jansen said that nothing had changed in relations with Altice since the company took the stake.
“Like all our shareholders we have good interactions with them,” he said. “They fully support the strategy we are embarking on and delivering against. There is no conversation about board seats and that kind of stuff. They are very supportive of what we are doing. Yes there is 11 December, a potentially important date: who knows what will happen.”
BT said that after delivering its £1bn cost-savings plan 18 months early, a £2bn target for 2025 would be brought forward by a year. It also lowered its forecast of capital expenditure in 2023 by £200m to £4.8bn. Drahi has a reputation for driving aggressive cost-cutting programmes at the telecoms businesses he controls.
“These results demonstrate an acceleration in the pace of transformation of BT,” said Jansen.
Shares jumped 11% on Thursday, making it the top riser on the FTSE 100.
Last month it emerged that BT had hired the advisory firm Robey Warshaw to strengthen its defences against a possible takeover bid.
BT reported a 3% decline in revenues to £10.3bn for the six months to September, while pre-tax profits were down 5% to £1bn. The company confirmed the reinstatement of a dividend to shareholders, 18 months after scrapping it to fund the £12bn rollout of full-fibre broadband across the country.
Jansen said that the global supply chain and labour shortages had not had an impact on its fibre rollout plans.
“We obviously have a very well-established supply chain; we have long-term deals with subcontractors,” he said. “There has not been a constraint on our build to date.”
The company also said that talks over a potential sale of BT Sport were continuing. The favoured suitor is Dazn, the sports streaming service run by Sir Leonard Blavatnik’s Access Industries.
“We are in talks with multiple parties,” said Jansen. “Not a long list, a small handful. We could continue to operate it ourselves with a small partnering effort, move to a joint venture and there is the possibility of an outright sale. We have had extensive long discussions but it is complicated. We are in no rush: we want to do the right thing for everyone.” The Guardian
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