BT's Verwaayen: Broadband is our priority

NEWS BT's new chief executive today pledged to make broadband his number one priority - but customers were given no indication of quite what this will mean in practice. Ben Verwaayen gave a polished perforance as he addressed his first financial results conference since taking over at the helm of BT, but was short on specifics for the company's future. A new commitment to cheaper broadband was the only concrete commitment among the usual statements about striving for "customer focus" and "profitable growth". The results were good by BT's recent standards, with debt and operating costs both reduced and the burden of the wireless business, mmO2, finally removed from the group's accounts. Without mmO2, profits before tax were up to £850m from £760m, broadly in line with market expectations. However, the group has cut investment in many areas and will have a hard time balancing the need to reduce costs and capital expenditure with the desire to invest to stay ahead in a rapidly developing market. Though market conditions have been tough this year, BT's smaller and weaker rivals have suffered more, and many markets have been less competitive than they were two years ago. For example, the company has stemmed the exodus of customers from its domestic fixed line business - but this is partly due to less competitive pressure from rivals NTL and Telewest. Profits per share were only slightly down on the same quarter last year, at 9.6p from 10.5p, but with exceptional items such as property sales taken out, the picture was less rosy, with EPS falling from 5.2p to 2.4p. Operating free cash flow rose 31.5 per cent, to £756m, against the same period last year. It's an encouraging sign from a business that is traditionally highly cash generative, but the improvement was funded largely by cutting investment rather than actually bringing in more money. The group's profits before interest, tax and debt amortisation (EBITDA) rose only 1.5 per cent to £1.507bn. Reported capital expenditure fell from £912m to £753m. Debt is still a big issue for BT, even though it has made impressive strides in reducing spending. The group owed £13.6bn at the end of the year, still significant by the standards of most companies, but not too bad compared to other former state telcos. The great BT garage sale is not over, either - the company's stake in French discount telephone provider Cegetel is also for sale, potentially worth billions, and the group has another £0.5bn of non-fixed assets to sell, chairman Sir Christopher Bland said. Nonetheless debt repayments are still significant, and BT is going to ask the credit ratings agencies to raise the ratings on its debt - which will in turn cut the cost of borrowing for the group.