By Kate Holton
LONDON (Reuters) - Britain's BT (L:BT) said it would not be drawn into a price war with rivals such as BSkyB (L:BSY), as it offset slower broadband growth in its second quarter with customers paying more for superfast internet connections and sports TV.
The 168-year-old former telecoms monopoly has transformed its business in recent years by investing in a new fibre network and offering a sports television service for broadband subscribers to increase customer loyalty.
BT said on Thursday that it had added 88,000 new retail broadband customers in the quarter, 48 percent of the net new additions to the market in Britain. That was down from previous levels of growth, and BT blamed competitive offers from rivals.
However, the group's consumer business revenues grew by 7 percent, with customers paying more on average as one in three broadband customers now took the faster fibre product.
After a strong run in the days ahead of earnings, BT shares were down 3.5 percent in early trade, underperforming the market, as investors fretted over the impact of a price war.
"This morning's trading statement may have exceeded forecasts (but) it failed to mask the aggressive competition in the sector," said Aymen Azizi, a trader at Accendo Markets.
But BT Chief Executive Gavin Patterson told reporters that the group would not rush to match bargains offered by rivals.
"We will remain very disciplined. We're focused on profitable revenue growth and while we've sharpened our offer a little bit it's not to the same extent that some of our competitors did," he said.
"We can afford with our offer to focus on fibre, to focus on BT Sport, to ensure we're competitive but not chasing volumes for the sake of it."
MOUNTING PRESSURE
BT stunned the communications market in 2012 when it won a package of rights to show Premier League soccer to its existing broadband customers, taking on Rupert Murdoch's BSkyB which had been poaching BT's broadband customers for years.
In response, Sky has started offering broadband packages for free to its existing customers, ramping up the pressure between the two groups.
Analysts at Jefferies said the recent set of results from both groups suggested that of the two, BT was doing a better job in luring those customers who were willing to pay more for premium offerings.
However they said the slowdown in market share additions could be seen as a drop off of momentum in the retail sector.
"BT describes the broadband market as particularly promotional in the second quarter, and claims not to have matched competitor discounts, focusing instead of higher-value subscribers," Jefferies said.
"Robust fibre/BT Sport momentum seems to bear this out, as does the observation that consumer average revenue per user continued to grow. This polarisation in the UK broadband market is an interesting theme, with BT seemingly defending well its position in the higher tiers."
The strong performance in the living room helped deliver a solid set of results to the boardroom.
An ongoing programme of cost cuts and an easing of investment levels in the sports service helped the group to report core earnings up 1 percent and pretax profit up 13 percent on an adjusted basis, both slightly ahead of forecasts.
That was off revenue of 4.4 billion pounds, down 2 percent on a reported level but in line with forecasts.
The strong trading performance enabled the group to reiterate its outlook and lift its interim dividend by 15 percent, at the top end of its guidance range.
(1 US dollar = 0.6259 British pound)
(Reporting by Kate Holton; Editing by Clara Ferreira Marques)