BT shares lower as Q3 results disappoint; worries over FY target

Third quarter revenues slipped by 3%, down to challenging market conditions for global services, while adjusted EBITDA fell 2% to £1.826bn.

ETX Capital analyst Neil Wilson said market conditions "look increasingly tough".

"A red flag is the order intake stats - on a rolling 12-month basis, it is up 12% to £3.6bn for business and public sector, but down 38% to £1.25bn for wholesale and ventures and down 25% to £3.7bn for global services. Deteriorating market conditions may once again raise fears that the progressive dividend is under threat," Wilson said.

While average BT Sport viewing increased 23% year-on-year the company actually lost 5,000 TV customers in the quarter, "which is not a good sign", he said.

"Net additions has been slowing rapidly over the last year, in the last quarter net adds of 7,000 compared with 63,000 a year before. Sports TV packages are the kind of things struggling households ditch first."

Wilson added that the presence of Amazon on the sports broadcasting scene - it has just entered the UK market by outbidding Sky for ATP tour tennis rights - posed a threat.

" Mounting sports rights costs are a problem with competition driving up the cost of winning rights. BT and Sky inked a deal last year to share rights but there is a new threat on the horizon – the arrival of cord-cutters in the sports broadcasting sector could spark further rights inflation – consensus estimates suggest Sky will have to pay about £600m a year more, £1.8bn in total over three years, for the right to show the Premier League," he said.

"We’ve seen what happens when Amazon appears on the scene. Ultimately losing TV rights may not be such a bad thing. BT may be happy to be a ‘number two’ to Sky, but it could fall further down the pecking order if Amazon and co muscle in. Bidding for the live English Premier League rights kicks off next week."