BT Cuts Enable Profit Despite Falling Revenue

BT, the leading telecoms service provider in the UK, has managed a small rise in quarterly earnings by squeezing itself in terms of investments.

Having realised that it no longer enjoys a monopoly in the telecom service market, with the advent of strong competitors like Virgin Media, TalkTalk and other new entrants in the market; BT has found the strategy of cutting costs, a very conducive measure for maintaining its position in the market.

BT was faced with shrinking sales, and the new ultra fast broadband has demanded a lot of investment in costly infrastructure, like installation of fibre connection, and other fibre equipment in users' premises. So the company decided it was time to reduce expenditure.

BT has managed to augment earnings for its third quarter by abstaining from high capital expenditure. a philosophy on which it had previously relied, and is now focusing on operational efficiency.

Despite a further 5% drop in revenue, cash generation and earnings for the three months to the end of December were higher, Reuters reports.

BT has been able to aggrandise its broadband customer base, adding another 146,000 retail broadband customers with 95,000 taking up its super-fast infinity broadband service in the quarter.

This cost cuts also aided the company in clearing its outstanding debt, with a billion pounds repaid in the quarter. But one thing to worry about is the pension deficit which rose, thus making it apparent for the investors, that an increase in dividends from the company will be constrained.

The company believes that if it follows this path, then an aim of £6 billion earnings in a year is not out of the question.