BT on track for full year due to broadband, pay-TV demand

LONDON (Reuters) - BT Group is on track to meet full-year expectations, it said on Thursday, after solid demand for fibre broadband and its new Champions League pay-TV football coverage offering helped it post first-quarter revenue and earnings in line with forecasts. The British broadband market leader, which is buying the country's biggest mobile network operator EE from Deutsche Telekom and Orange SA, said an additional 217,000 customers took its superfast fibre broadband service, while it added 60,000 pay-TV customers. Demand for television was helped by the pending launch of its exclusive rights to show Europe's premier football competition, the Champions League, this season. While the strong performance from the consumer business meant the group maintained its full-year target, shares in BT slipped on concerns about the Global Services division which handles the IT needs of multinational corporations and governments. Revenue on an underlying basis fell 4 percent in the three months to the end of June at Global Services, while core earnings there fell 11 percent, due to a slowdown from several British government and health contracts which were moving from an intensive phase to a case of more steady contract management. BT Chief Executive Gavin Patterson said the result at Global Services, which had in the past been the cause of two large profit warnings, tended to fluctuate from quarter to quarter but he noted that the division had a strong order book. Shares in the group were down 2.5 percent at 462 pence, following an 8 percent rally in the last three weeks. As a group, core earnings were up 1 percent at 1.4 billion pounds, in line with market expectations, while revenue was flat on an underlying basis, marking an improving trend on the fourth quarter when it fell by 1.3 percent. "Inflection in the underlying revenue trend ... was expected but is important nonetheless," analysts at Jefferies said. "The area of concern remains Global Services where UK public sector has failed to stabilise in-line as management had predicted." The gradual revenue improvement means BT is on track to meet its full-year target of sales 'growth', it said. It has also said it expects 'modest growth' in core earnings. (Reporting by Kate Holton; Editing by Paul Sandle and Greg Mahlich)