For the quarter, BT posted net income of GBP428 million, up from GBP376 million in the year-ago quarter. Sales increased to GBP4.60 billion, from 4.57 billion in the year-ago quarter.

For the six months ended September 30, BT posted net income of GBP733 million, up slightly from the GBP726 million in the same period in 2003. Sales increased slightly to GBP9.17 billion, from GBP9.15 billion a year ago.

Meanwhile, net debt at the group fell 6% to GBP8.27 billion. The company is aiming to cut borrowings to about GBP7 billion by March 2007.

Chief executive Ben Verwaayen has implemented several innovative strategies to minimize the impact of BT’s shrinking fixed-line business and the effects of increasing UK competition. These include the so-called 21st Century Network (21CN), announced in June, which entails moving BT’s entire customer base on to an IP-based network starting in 2006.

The second thrust of Mr Verwaayen’s approach is sales from new wave technologies, essentially services, broadband, and mobile telephony revenues. Going forward, these are areas that BT will be increasingly relying on to offset the decline in its fixed-line business.

BT’s ‘new wave’ business is filling the holes left by BT’s lack of a proper mobile division to act as a growth engine, and its relatively small portion of the UK broadband market when compared to European rivals. New wave revenue increased 36% to GBP1.03 billion for the second quarter. New wave sales also accounted for 22% of the group’s revenue compared to 17% in the second quarter of last year. Sales from its traditional, fixed-line businesses declined 6%.

Last week, rumors circulated of a boardroom bust-up between BT Retail, headed by Frenchman Pierre Danon, and BT Wholesale, headed by Paul Reynolds. Mr Danon is reportedly tired of trying to compete with residential broadband suppliers that are taking advantage of regulatory reform to undercut BT broadband prices.

Mr Danon is also said to be considering using and investing in the cheaper alternative offered by local loop unbundling in order to cut costs. BT Retail is by far the biggest customer of its wholesale arm, and moving to LLU would seriously damage revenues at BT Wholesale.

BT added more than 607,000 users in the quarter to its total of 3.3 million broadband customers at the end of September. The last million connections were added at a rate of one every 15 seconds, BT said. The company is aiming for 5 million broadband customers in 2006.

At a press conference to reveal its interim results, BT chairman Sir Christopher Bland insisted that no boardroom bust-up had taken place. However, tensions were still visible, especially from Mr Danon, who looked distinctly uncomfortable when Mr Verwaayen said BT Retail needs a level playing field to compete, and that there is no case of BT against BT.

It is no wonder that Mr Danon was looking frustrated. His division, BT Retail, saw revenue decline 2% in the second quarter to GBP3.12 billion, from GBP3.20 billion, despite a slowing rate of decline from its fixed-line business and continued strong broadband uptake. What must have been especially galling is that sales at BT Wholesale (the bulk of whose revenues are made up from the money it charges BT Retail) were up 2% at GBP2.24 billion.

Meanwhile, the BT Global Services division’s second-quarter sales rose 9% to GBP1.5 billion. The importance of this division to BT was underlined earlier this week when it agreed to buy Infonet Services for $965 million to add a 180-country data network.

It is an interesting time for the UK telecoms sector. The next couple of weeks could prove to be crucial for the shaping of the future telecoms and broadband landscape. This is because the telecoms regulator Ofcom will shortly publish the second part of its consultation on the UK’s phone market. The first review, published in April, sought views on whether BT should be broken up to promote competition.

Ofcom has already ordered BT to cut the charges for providing competitors access to its network. The reductions, some reportedly as high as 70%, are likely to be a source of friction at BT. Earlier this week Mr Verwaayen warned that investment in the UK’s information economy could be torpedoed if telecoms regulator Ofcom bungles the forthcoming review. No one from Ofcom was available for comment at the time of writing.