ii view: look who just bought 12% of BT Group

A new shareholder appears to rubber stamp BT's direction of travel, but has dismissed takeover talk. We assess prospects. 

Share stake in BT Group

ii round-up:

Broadband and mobile phone network operator BT Group (LSE:BT.A) today acknowledged a 12.1% share purchase made in the company by Altice UK. The acquisition of 1.2 billion shares makes it the joint largest shareholder alongside Deutsche Telekom.

Altice is owned by multi-billionaire telecoms dealmaker Patrick Drahi, although Altice confirmed that the share stake was being taken as an investment and not in relation to a takeover. 

BT shares rose by around 3% in UK trading, having risen by more than 50% since pandemic lows in March 2020. Shares for telecom rival Vodafone (LSE:VOD) are up by close to 20% in that time.

Altice owns and operates telecom and broadband operations internationally, including networks in the US, Israel and France. Its UK arm confirmed that it has made the £2.2 billion investment in order to capitalise on BT’s rollout of fast broadband across the UK.  

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Greater certainty following developments, including regulatory clarity and the government’s new tax-related investment incentive, are enabling BT to increase and accelerate its total Fibre-to-the-Premises (FTTP) build from 20 million to 25 million homes by December 2026.

BT confirmed that it welcomes all investors who recognise the long-term value of its business and the important role it plays in the UK, and that it was making good progress in delivering its strategy and plan. 

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ii view:

BT Group provides and sells communications products and services to consumers, small and medium-sized enterprises and the public sector. It operates across the four divisions of consumer, enterprise, global and Openreach. Its three consumer division brands are BT, EE and Plusnet, while its enterprise business connects businesses and public sector organisations. The global division manages IT infrastructure networks for companies in over 150 countries. Its Openreach division physically connects homes and businesses across the UK.   

For investors, a previous decision to suspend and then rebase the dividend was tough to swallow. BT’s cash-generating qualities have, over the years, made it appealing to income-seeking investors. The pandemic and reduced business use during required lockdowns and closures have also raised headwinds over the past year or so. 

But today’s confirmed significant investment by an experienced telecoms investor appears to rubber stamp BT’s direction of travel. Modern economies are now reliant on fast internet connections, a fact further emphasised by the global pandemic and work and shop from home requirements. The previous prioritisation of investment over dividend payments looks sensible for the long term. In all, a growing fibre business and a forecast dividend yield in the region of 4% continue to leave BT looking attractive for the long term. 

Positives

• Supportive government measures
• A pending return to dividend payments

Negatives

• Covid hinderance and ongoing uncertainty
• Subject to regulatory rulings

The average rating of stock market analysts:

Strong hold