Originally Posted by RichardRees:
“Is it somewhat more complicated, and marginal gains for BT a lot lower? For every switch (except from cable) BT's wholesale arm loses the wholesale revenue from the other supplier. It is somewhat complex (for me at least) to work out what the economics is where the line has been unbundled, but, in general, the gain to BT as a whole is a lot lower than the revenue from a switched customer. Marginal costs are significant in the calculation of the net worth to BY.”
Richard, just coming back to your point - in a bit more detail:
If someone switches their broadband from another ISP to BT, BT Consumer division will still pay BT Wholesale division for the line etc so BT Wholesale's reported numbers will be unchanged.
So what it boils down to is the profit margin within BT Consumer division - the Consumer division's P&L having been charged with the payment to BT's Wholesale division.
So what is that profit margin?
The answer is we don't know precisely but we do know the overall EBITDA% of BT's Retail division (which is Consumer + Business; Consumer accounting for 50% of Retail).
BT Retail EBITDA is £429m on revenue of £1,843m - ie an EBITDA% of 23%.
Now, we don't have the numbers for Consumer and Business separately and of course within Consumer there is phone, broadband and TV (and TV will include all the BTS costs) but even so, allowing for all of that, we can see that the combined Phone + Broadband EBITDA is very unlikely to exceed about 50%.
If it was much higher than 50% the numbers overall just wouldn't fit - unless Business had negative EBITDA which seems very unlikely.
In reality, it's probably quite a bit below 50%. If you add back the numbers for BT Sport (EBITDA
minus £100m), the overall Retail EBITDA%
excluding BT Sport becomes 29%. Now maybe Business has smaller margins - I don't know - but very plausible that Consumer Phone + Broadband EBITDA doesn't exceed about 40%.
Interested in your thoughts as always!