BT Drops Search for Openreach Partner As Fiber Deployment Costs Decline | Broadband
BT has scrapped plans to find a joint venture partner to help fund the rollout of its next-generation broadband network to an additional 5 million homes, ahead of a possible takeover by billionaire investor Patrick Drahi next month.
The company said it had abandoned its plan to find a partner for the Openreach subsidiary because the cost of deploying the new network had dropped significantly and adoption by homes and businesses turned out to be better than expected.
In May, BT announced it was stepping up the pace of Openreach’s plan to bring full fiber to 20 million homes by 2026 from 5 million through a potential £ 3 billion joint venture with a third party. .
Bringing in a third party was seen by some as the first step in being able to potentially put a price on Openreach, which was again raised as a potential spin-off target after Altice’s Drahi decision to take a stake in 12.1% in BT in June.
“We can afford to fund it ourselves,” said Philip Jansen, CEO of BT. “The cost of switching to a full fiber home has dropped by 15%, which is a huge savings when you consider 19 million more homes to reach our goal. It is preferable that the shareholders have 100% control. We didn’t want to do anything to slow down [Openreach] down or provide some complexity.
Altice said building the stake was not part of a larger takeover plot. However, Drahi is free to act under UK takeover rules after December 10. Jansen said nothing has changed in relations with Altice since the company took over the stake.
“Like all of our shareholders, we have good interactions with them,” he said. “They fully support the strategy we are embarking on and applying. There’s no conversation about board seats and that sort of thing. They are very supportive of what we are doing. Yes there is December 11, a potentially important date: who knows what’s going to happen.
BT has said that after delivering its £ 1billion savings plan 18 months earlier, a target of £ 2bn for 2025 would be brought forward by one year. He also lowered his forecast for capital spending in 2023 from £ 200million to £ 4.8 billion. Drahi has a reputation for conducting aggressive cost reduction programs in the telecommunications companies he controls.
“These results demonstrate an accelerating pace of BT’s transformation,” said Jansen.
Stocks rose nearly 5% in early trading on Thursday morning, making it the biggest rise in the FTSE 100.
Last month, it emerged that BT had hired consultancy firm Robey Warshaw to beef up its defenses against a possible takeover bid.
BT reported a 3% drop in revenue to £ 10.3 billion for the six months ending September, while pre-tax profits were down 5% to £ 1 billion. The company has confirmed the reinstatement of a dividend to shareholders, 18 months after abandoning it to fund the £ 12bn rollout of fiber-optic broadband across the country.
Jansen said the global supply chain and labor shortages had not impacted its fiber deployment plans.
“We obviously have a very well established supply chain; we have long term agreements with subcontractors, ”he said. “There has been no constraint on our construction to date.”
The company also said discussions about a potential sale of BT Sport are continuing. The preferred suitor is Dazn, the sports streaming service run by Access Industries from Sir Leonard Blavatnik.
“We are in talks with several parties,” Jansen said. “Not a long list, a small handful. We could continue to operate it on our own with a little partnership effort, move to a joint venture and there is the possibility of an outright sale. We had long, in-depth discussions, but it’s complicated. We are in no rush: we want to do the right thing for everyone.