* Costs rise while questions raised about growth
* BT reiterates full-year outlook (Adds CEO comments, analyst reaction, shares)
By Paul Sandle
LONDON, Feb 2 (Reuters) - Steps to improve customer service and the cost of providing new premium handsets including the iPhone X squeezed quarterly earnings at BT, sending shares in Britain’s biggest broadband and mobile provider to a five-year low on Friday.
Shares in BT slid almost six percent as analysts questioned where growth would come from after a turbulent 2017 that included an accounting scandal in Italy.
Mobile brand EE was the only part of the company to enjoy sales growth as the group reported adjusted core earnings down 2 percent to 1.8 billion pounds ($2.6 billion) on revenue down 3 percent at 5.97 billion pounds in the three months to the end of December.
Analysts at Jefferies said revenue had come in 1.4 percent short of expectations, while there was a 1.5 percent miss on core earnings, reinforcing its view that it would be a challenge for the group to meet its own guidance for the year.
“Looking across the divisions, an absence of growth remains the striking impression,” said the broker, which has a “hold” rating on the stock.
BT Chief Executive Gavin Patterson said the performance in the third quarter of its financial year was broadly in line with its expectations, “We remain confident in our outlook for the full year,” he said.
Patterson, in the role since 2013, has to balance a variety of demands on BT’s cash flow as well as maintaining its progressive dividend policy.
Costs include investing in fibre networks, seeking to retain Premier League soccer rights for its TV service and plugging a pension deficit.
The group’s Global Services division, the source of a profit warning in its previous financial year, is also being restructured against a backdrop of tough market conditions.
However, Patterson pointed to progress in improving customer service in its consumer business, long below the industry average according to regulator Ofcom.
“We have seen our sixth quarter in a row of improving customer satisfaction as a result of sustained investment that we are making in service,” he told reporters.
Complaints in BT broadband were down 31 percent down year-on-year, he said.
BT moved on to the front foot against criticism of the speed of its broadband services on Thursday, when it announced a more ambitious plan to take ultrafast full-fibre broadband to 3 million homes and businesses.
Patterson said the higher costs of the new iPhone 8 and iPhone X had increased customer acquisition costs at EE. EE added 235,000 contract customers in the period.
The company’s outlook for the full year sees broadly flat underlying revenue, with core earnings falling to between 7.5 billion and 7.6 billion pounds.
Analysts doubt it can meet its earnings target though, predicting they will come in below that range at 7.475 billion pounds, according to Thomson Reuters data. ($1 = 0.7011 pounds)
Reporting by Paul Sandle; editing by Kate Holton/Keith Weir