ii view: BT shares sat on a dividend yield of over 6%

First-quarter trading update to 30 June

• Adjusted revenue up 4% to £5.2 billion
• Adjusted profit (EBITDA) up 5% to £2 billion

Chief executive Philip Jansen said:“We’ve made a strong start to the year, in what remains a very competitive market. Openreach is now 44% of the way through its full-fibre build, and customer demand has continued to grow with a total network take-up rate of 32%.

“We continue to drive transformation across the group, and while there remains much to do it’s clear that our strategy is working and BT Group is set up for success.”

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ii round-up:

BT Group (LSE:BT.A) operates across three divisions. Its Consumer division supplies more than 14 million households with fixed or mobile communications with its brands made up of BT itself, EE and Plusnet. 

Its Business division connects companies and public sector organisations, along with managing IT infrastructure networks for them in both the UK and overseas. 

BT Openreach manages the group’s fixed networks including mobile phone masts and physically connects homes and businesses across the UK. It manages the copper phone line network and is rolling out fast full-fibre broadband across the UK. 

For a round-up of this latest trading update announced on 27 July, please click here. 

ii view:

Tracing its roots back to 1846, BT Group today is a FTSE 100 company whose rivals include Vodafone (LSE:VOD) and Comcast Corp Class A (NASDAQ:CMCSA) subsidiary Sky. Its aim is to be the market leader in new full-fibre broadband and 5G mobile communication networks. Its fibre broadband service is now available to 11 million premises or 44% of its 25 million completion target come the end of 2026. Its 5G mobile phone customer base stands at 9.2 million. 

Earlier in the year it detailed plans to cut up to 55,000 jobs as it completes the roll-out of its fibre broadband network, including some customer service roles given its investment in artificial intelligence technology. It also recently announced the appointment of its new chief executive and existing board director Alison Kirkby. 

For investors, competition across the sector remains intense. Fibre broadband and 5G investment costs are being swallowed, while costs such as energy and staff pay have risen. Corporate customers are looking to reduce their own costs including those of communications and IT services, while group net debt of £18.9 billion as of its financial year-end on 31 March compares to a current stock market value of around £11.2 billion.  

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More favourably, the roll-out of its own fast-speed fixed and mobile networks continues. Increased and inflation-linked customer bills should help it counter heightened costs. The new chief executive will likely look to inject renewed vigour into its strategy, while a major share stake held by telecoms dealmaker Patrick Drahi arguably generates speculative interest.  

For now, and with analysts estimating a fair value price of over 180p per share and the stock sat on an historic and estimated future dividend yield of over 6%, income investors at least are likely to stay patient. 

Positives

• Expanding fibre broadband and 5G network
• Attractive dividend yield (not guaranteed)

Negatives

• Intense industry competition
• Subject to regulatory rulings

The average rating of stock market analysts:

Strong hold