BT is pledging a dividend bonanza as its prices rocket

BT cheered investors today with a promise of 10%-plus dividend rises for the next two years even as its 10 million customers face inflation-busting price hikes from next month.

Full-year profits rose 9% to £3.5 billion, beating City forecasts, and came on the back of the best rise in headline revenues for seven years.

The figures included a two months boost from the £12.5 billion takeover of mobiles operator EE. Shares in the telecoms giant rose more than 3% as it forecast free cashflow would be well over £3 billion for each of the next two years and said it would up its dividend by at least 10% each year.

Today it raised last year’s dividend by 13% to 14p a share. Chief executive Gavin Patterson (pictured) defended next month’s price rises, which will see basic line rental going up by 5%, saying: “This is not simply about a price rise. We’ve improved the service and added value.

“Customers want to get better and better products, particularly in broadband, and that’s what we are giving them.”

Patterson also revealed a £6 billion investment programme with the aim of getting ultrafast broadband passing 12 million homes and offices by 2020, of which two million would be full fibre to the door. He denied this was just a response to regulator Ofcom, which recently said BT could hold on to Openreach, its network business, but must improve its service for rivals and keep wholesale prices in check.

Patterson said: “The UK is a digital leader today and it is vital that it remains one in the future. Virgin and BT have pledged to invest and we will now see if others follow our lead.”

But Andrew Griffith, finance director of Sky, a rival and customer, questioned BT’s claim, saying: “Today’s statement shows that BT continues to see copper as the basis of its network for 21st-century Britain. It is clearer than ever that their plans for fibre to the premise broadband will bypass almost every existing UK home.” BT is making strong inroads on Sky’s sports customer base since it bought the rights to the Champions League and Europa League.

Subscriber numbers to BT TV rose by 28% to 1.5 million and the Liverpool versus Manchester United Europa League first leg attracted a record two million audience.

Patterson said the group was also increasing the expected cost savings from merging BT and EE from £360 million a year to £400 million. He also said 100% of EE’s call centres and 90% of BT Retail’s would be back in the UK by the end of this calendar year.

BT shares rose 14.5p to 454p