BT unveiled plans to create a new Consumer unit, which will bring its EE mobile business together with its fixed and internet services, as it also said it made a £225 million payment to Deutsche Telekom and Orange to avoid a potential legal spat.
The new Consumer unit will also include the BT-branded residential business and low-cost broadband brand Plusnet.
The division will be led by EE CEO Marc Allera, who will take his job title to the new unit. BT’s existing consumer chief, John Petter, is leaving “to pursue roles outside the Group”.
Speaking at the company’s earnings call for its first quarter, BT Group CEO Gavin Patterson (pictured) said the new unit would “leverage our competitive position as the only truly converged player in the market”.
Integration of EE into the wider BT business has been the subject of a number of reports since the acquisition of the company from Orange and Deutsche Telekom in the early part of 2016.
In its first year under the BT umbrella, the company focused on combining back-end systems and integrating EE’s wholesale and enterprise units.
The restructuring move announced today is the company’s first strategic attempt at bringing EE into the consumer side of the BT business.
During BT’s first quarter – for the three months to the end of June – it recorded a 42 per cent fall in profit, as it paid a combined £225 million to Orange and Deutsche Telekom to settle a dispute on losses made on shareholdings acquired as part-payment for EE.
Following the UK company’s well-publicised £530 million accounting scandal in its Italian unit, and subsequent dive in share price, Deutsche Telekom wrote down the value of its 12 per cent stake and Orange started disposing of a segment of its four per cent share, while booking a loss on the rest.
As part of the EE acquisition, both companies were offered guarantees against a slump in the value of their BT stake.
Speaking to investors, Patterson said the payment was “very disappointing” but added it was in the best outcome for the company as it avoided potential litigation.
The pay-off contributed to a 42 per cent year-on-year drop in BT’s pre-tax profit, for the three months to the end of June. It made £418 million before tax on revenue of £5.8 billion – up 1 per cent on Q1 2016 revenue.
EE revenue rise
EE reported a 4 per cent year-on-year rise in revenue to £1.29 billion. By the end of the quarter, its mobile base was 29.8 million with a 210,000 net increase contract customers and 385,000 connection decline in prepay.
The results only take into account two weeks of EU roaming regulations – effective from June 15 – but BT warned the impact in Q2 would be higher than initially expected. Patterson said it would probably be “high tens of millions” rather than the mid-tens predicted in previous statements.