ii view: why BT shares just rallied to 8-year high

First-half results to 30 September

• Revenues up 1% to £8.8 billion
• Adjusted profit (EBITDA) up 1% to £4.1 billion
• Pre-tax profit up 12% to £1.1 billion
• Interim dividend up 2% to 2.5p per share
• Net debt of £21 billion, up from £20 billion in late March

Guidance:

• Continues to expect full-year adjusted revenue of £17.1-17.6 billion
• Continues to expect full-year adjusted profit of £8.1-8.2 billion

Chief executive Allison Kirkby said:

“We are building the UK’s digital backbone, connecting and protecting the country like no-one else, while accelerating our transformation as we create a better BT for all of us.

“BT and EE have been recognised as the UK’s best broadband and mobile networks, while more households are choosing our mobile and TV services together. And our growing order book in Business is supported by leadership in secure and sovereign connectivity solutions.”

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ii round-up:

BT Group (LSE:BT.A) today detailed broad progress, reaffirming full-year and medium-term guidance.

First-half revenues to late September rose 1% to £8.8 billion, pushing adjusted profit (EBITDA) up 1% to £4.1 billion. Pre-tax profit climbed 12% to £1.1 billion, assisted by lower restructuring costs. Second-quarter adjusted revenues and profit of £4.4 billion and £2 billion respectively beat City estimates by around 3% each.

Shares in the FTSE 100 company rose 4% in UK trading having come into this latest news up by around a quarter so far in 2026. That’s similar to rival Vodafone Group (LSE:VOD) during that time. The FTSE 100 index is up by close to a tenth year-to-date.

BT operates across the three divisions of Consumer, Business and Openreach, with Openreach managing the group’s fixed networks, connecting homes and businesses. The telecom giant's international business was recently partnered with that of Verizon’s and is now reported as discontinued.

A 5% drop in group capital, or investment expenditure to £2.3 billion was aided by reduced build activity as the company continues to expand its 5G mobile and fibre broadband networks.

Passing an additional 1.2 million properties during the period, total premises where its fibre broadband is now available total 24.1 million. UK coverage for the group’s 5G mobile data service rose to 81% from 73% in March.

An interim dividend of 2.5p per share, payable to eligible shareholders on 10 February, is up from 2.45p a year ago.

BT repeated medium-term guidance for sustained growth in both adjusted revenue and profit. A third-quarter trading update is scheduled for 4 February.

Broker Berenberg reiterated its ‘buy’ stance on the shares, with a target price of 300p per share.

ii view:

Group brands cover BT itself, EE and plusnet. Openreach generated most adjusted profits (EBITDA) during this latest half-year at 55%, followed by Consumer at 31% and Business the balance of 14%. The Consumer division highlights itself as the UK’s largest provider of consumer mobile and fixed broadband communications services. The Business division serves more than one million companies and public sector organisations.

For investors, BT continues to face intense competition from rivals including O2 owner Telefonica SA (XMAD:TEF) and Sky owner Comcast Corp Class A (NASDAQ:CMCSA). A forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap. Group net debt of £21 billion as of late September compares to a stock market value of around £23.5 billion, while regulatory risks have arguably increased given previous comments made by PM Andy Burnham regarding sectors like water and energy, pointing to a less friendly government backdrop.

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To the upside, BT’s ongoing transformation includes a deal earlier this year to partner its international business with that of Verizon, enabling management to increase focus on the core UK business. The recently announced acquisition of TalkTalk prevents it going to a potential rival, with the deal eventually expected to prove value accretive. An expected decline in capital expenditure over the medium term as the fibre broadband network buildout completes, will boost group cashflows, increasing financial flexibility and potentially enabling a paying down of debt, a bigger dividend, or both. The increased use of AI is also expected to reduce customer service costs.    

On balance, and while heavy investment expenditure continues, spending will begin to drop off in time, while a dividend yield of around 3.7% will likely see investors remain supportive.  

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:

Hold

Lee Wild, head of editorial at ii, owns BT shares.