Shares in BT Group PLC (LSE:BT.A) slumped almost 10% as investors took fright at the numbers in its latest interim update.
Some 89,000 broadband customers switched during the three months to September, with the telco blaming strikes by staff for the departures.
BT said its engineers had managed to install 40,000 fewer connections during the period due to the industrial action.
Other customers were lost due to churn and cost competition with rivals, said the statement.
BT’s broadband is pretty central to the business right now, with its Openreach arm generating 27% of the £10.4bn half-year revenues even if that is where most of the cash spend is currently heading.
Philip Jansen, chief executive, called on the government to extend the super-deduction tax break to help fund the roll-out of its fast fibre network (FTTP), an expansion that will push the annual spend on capex up to between £4.8bn-£5bn a year for the foreseeable future.
It is growing fast, though. FTTP connections rose 50% year on year with the network now accessible by 8.8mln households and businesses with a further 6mln connections underway. BT has a target to connect 25mln premises by the end of 2026.
To help pay for the new network, BT also announced an additional £500mln of cost savings on top of an existing £2.5bn programme and that will mean job losses, said Jansen.
Around 40,000 staff walked out on strike in October with more industrial action threatened this month in a dispute over pay and the prospect of more job losses is unlikely to improve the mood of unions.
Analysts too are sceptical. Sophie Lund-Yates, at Hargreaves Lansdown, said: “It’s never a good look to have to cull your cost base in the name of cash flow conservation. That takes sensible efficiency planning into the realms of worry.
“The biggest question mark left by the announcement is precisely where the cuts are going to come from.”
Global (£1.6bn of half-year sales) has been a problem child for years so might feel the pressure, while Enterprise was flat again but seems a core part of the operation.
Add in net debt of £19bn in a rising rate environment and a pension deficit of £4.4bn and the issues over cash are pressing.
One option is the dividend, which was maintained at 2.31p at the half year and costs around £760mln a year.
It would be a brave CEO to take the step of cutting it, but a 10% share price fall today suggests some in the market think it is looking exposed if nothing else.
Shares dropped 9.86% to 115.15p.