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BT Group takes long-term view as revenue slips 3%

British telecom giant BT Group encouraged investors to shift their focus away from quarterly swings and toward a long-term view after costs related to pensions, business rates and its investments lowered profits in the third quarter.

BT's weak performance across most of its divisions follows a particularly rocky year that began with an accounting scandal at its Italian business which cost the group a £530 million write-down.

"Some of these headwinds are a little fierce at the moment but I'm convinced as a business we'll be able to [find] our way through it," BT Group CEO Gavin Patterson said during a Feb. 2 earnings call.

Patterson stressed that strong growth at the company's mobile business, EE, which posted a 4% increase in revenue to £1.36 billion, meant a "strong recovery" centered around convergence between fixed and mobile offerings is in its sights.

"We're the one operator in the U.K. that can really exploit the trend [in] Europe [toward] creating converged services for consumers," the CEO said, adding that the group was "confident" that further investment in the mobile business and new products around IP would provide long-term, sustainable growth.

With a total of 29.8 million subscribers of which 19.6 million are on 4G EE's coverage now spans 90% of the U.K. BT said it added 235,000 postpaid mobile customers during the third quarter, while the prepaid customer count declined by 299,000 in line with broader industry trends.

BT said it would also focus on expanding the deployment of fiber, following Openreach's announcement on Feb. 1 that it would extend fiber broadband to 3 million U.K. homes and businesses before the end of 2020. The broadband infrastructure provider said it was accelerating its Fiber to the Premises, or FTTP, build target by 50%, as part of its "Fiber First" program to provide faster and more reliable broadband speeds at an estimated cost of £300 to £400 per premise passed over the next three years.

Fiber broadband customers, up by 208,000 subscribers during the last quarter, now make up 59% of the group's retail customers. BT's total number of homes and businesses connected stands at around 9.2 million, the company said.

Meanwhile, UEFA Champions League soccer matches and exclusive coverage of the Ashes cricket series led to one of BT Sport's strongest quarterly performances ever, with average viewing figures up 23% year over year. The company is betting its recent multiyear content sharing deal with U.K. pay TV giant, Sky plc, will go toward increasing that distribution.

Under the terms of the agreement, which comes into force from early 2019, Sky will obtain wholesale supply of the BT Sport channels, allowing it to sell the channels directly to its customers. Meanwhile, BT will be able to market and sell Sky's NOW TV service, including Sky Sports, Sky Cinema and the Sky Atlantic channel, to its TV customers.

Overall, BT's adjusted EBITDA fell 2% to £1.83 billion for the three months ended Dec. 31. Reported revenue was down 3% to £5.97 billion while underlying revenue declined 1.5%.

Challenging market conditions at the group's Global Services division resulted in a 9% revenue decline while Business and Public Sector revenue dropped 5% to £1.13 billion. Wholesale and Ventures revenue fell 4% to £506 million.

BT's shares were down nearly 6% on Feb. 2 as of 10:41 a.m. GMT.