BT Group To Offer Subscription-Based Services For The Netflix Generation

The British broadcaster, BT Group has expressed an intention to scrap pay-TV packages. Alternatively, the Group decided to opt for offering prime content on monthly revenue-generating model. This move can be attributed to keeping up with the competition and flexibility offered by streaming service providers such as Disney+ and Netflix. The company shall provide customers with payment schedules for specific content (prime) such as Premier League Football on a monthly basis and intends to scrap its conventional pay-TV packages.

The company, over the years have bundled TV packages such as from Champions League to Premiership Rugby and boxing with broadband and phone services, to lock consumers into long-term contracts using its multibillion-pound portfolio of rights. However, the rise of streaming, pioneered by players such as Netflix it has been reshaping traditional consumer behaviour and habits to more flexible options from costly TV packages. BT Group is planning to venture into a range of new flexible TV packages with a variety of genres such as sports, entertainment and others, which can be subscribed by the users on a monthly basis.

In a streaming world, where customers are looking to consume content, providing with flexibility and options is the need of the hour. Flexibility offers end users with more options. For instance, if the user is travelling for a while, it is easy to switch off a subscribed package or after a World Championship is over, people can unsubscribe and may prefer to spend their money on movie, or entertainment, or leisure packages.

The Group’s basic package starts from £10 for entertainment, and the range of packages go up to £40, which is a sports package. Building or adding package is effortless as it can be managed online, the end-users will have to subscribe for a BT broadband package for up to two years, while the competitors are offering a basic pack bundled along with the broadband package to their customers. The management is of the opinion that this easy exit from the subscribed packages shall not dent the company’s profits.

The users can upgrade at will and its totally up to them how they want to consume the content. The company recently launched a monthly pass to watch its sports content without a contract for first-time users. For the non-BT customer, the company has designed a £25 monthly pass. For broadband customers, the company has rolled out a sports package for £15 a month exclusively. This strategy allows to increase the subscriber base of the company by including “pay-lite” viewers who are least probable to become full subscribers without denting its core base. Sky, the nearest rival service provider, made its move to take on Netflix by foraying into streaming services in 2012.

Business overview: BT Group Plc

BT Group Plc (LON: BT.A) is a London, the United Kingdom based Telecommunications company, that engages in the business of providing Fixed Line Telecommunications as well as various other services. The company’s other services include the likes of broadband and internet services, mobile and television products as well as broadcasting services and information technology solutions. The company is also in the business of running various broadcasting channels on the television, which include the famous networks like the BT sport, the BT news and some other BT networks. The company operates its consumer segment through around 600 and has approximately 30 million customers, under the pretext of three of its brands called, BT, EE as well as PlusNet. The company’s Enterprise business serves around 1.2 million businesses in the United Kingdom as well as the Republic of Ireland to provide mass-market services like payphones and directory enquiries amongst others. The company’s global business operations include mainly providing Information technology solutions as well as cybersecurity services to approximately 180 countries in the world.

A brief summary of company’s recent results of Q3 FY20

On 30th January 2020, the company announced results for its third quarter as well as nine months ended 31st December 2019. In the nine months ended 31st December 2019, the company reported a marginal decline in revenue of 2 per cent year on year from £17.558 billion to £17.246 billion. The decline in revenue has been attributed to the decrease in traditional fixed voice usage. The decision to reduce low margin businesses was another reason for the decline in revenue. The profit before tax for the period was reported to be at £1.911 billion for the period, while the profit after tax was reported to be at £1.526 billion. The Adjusted EBITDA (IFRS 16) for the period was down by 3 per cent year on year from £6.100 billion in the nine months ended 31st December 2018 to £5.9 billion in the reported period. Global businesses were the major driver of this reduction, with global business revenue declining by 7 per cent year on year for the nine months period ended 31st December 2019. The company highlighted that it had made the 5G technology live in around 50 locations in the United Kingdom.

BT Group Plc-Stock price performance

(Source: Thomson Reuters)

While writing (as on 18 February 2020, at 01:08 PM GMT), BT Group Plc shares were trading at GBX 154.12 per share; surged by 0.25 per cent as compared to the previous day closing price level. The company’s market capitalisation was around £15.24 billion.

BT Group shares have clocked a high of GBX 235.15 (as on 19 February 2019) and a low of GBX 150.75 (as on 13 February 2020) in the past year. At the current price point, as quoted in the price chart, the company’s shares were trading 34.46 per cent below the 52-week high price point and 2.24 per cent above the 52-week low price point.

At the time of writing, the stock’s volume before the market close, stood at 4,347,926. Stock's average daily traded volume for 5 days was 16,838,117.40; 30 days- 28,441,519.13 and 90 days – 24,834,162.07. The company’s stock beta (180 days) was 0.81, which makes it less volatile as against the benchmark index. It has a dividend yield of 10.02 per cent.

The stock’s average daily traded volume for 5 days plunged by 40.80 per cent as against 30 days average traded volume. At the time of writing, the shares of the company were trading below the 30-days and 60-days SMA.

In the past 1 month, BT Group shares have delivered a negative return of 16.50 per cent. Also, on a YTD (Year-to-Date) time interval, the stock plunged by approximately 20.11 per cent and was down by 20.34 per cent in the last three months.

Share's RSI (Relative Strength Index) for the 30-days, 14-days and 9-days was recorded at 32.70, 25.29 and 24.32 respectively. Also, the stock’s 3-days RSI was recorded at 38.48.