The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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"I think you’re getting confused about networks again. Those speeds will only ever be backbone, co-ax is only the last leg into the home, apart from where it is now fibre for cable networks."
Nope, no confusion, I just used the link to demonstrate the bandwidth available across single mode fibre. I realise that they wont use local fibre access for that sort of transmission rate, but a PON network offers the possibility of bespoke services sharing the Fibre with GPON and XGS-PON services. Because of optical splitters/filters, and wavelength specific SFP/XFP's, the ability's there to supply 100GB channels over Local Access Fibre, should BT decide to offer such bespoke services to business customers. I've already pointed out, in previous posts, the disadvantages of HFC compared to PON. It's unlikely that HFC will be capable of 10GB symmetrical even with DOCSYS 4, whereas it's a breeze over PON. By splitting off at the exchange, they can even offer separate services independent of the OLT, without installing any equipment in the street, or affecting existing users, as it's passive from the "Head End" to the customer premises, with just splitter/combiners along the route.
I think you’re getting confused about networks again. Those speeds will only ever be backbone, co-ax is only the last leg into the home, apart from where it is now fibre for cable networks.
Networks have a hierarchy for a reason, the backbone has to run at multiples of the access layer, otherwise none of this stuff works. The arguments you make are characteristically bogus. For instance why would you ever need those data rates in the access layer and how could that ever be supported across a backbone (Coax is only ever in the access layer for cable areas) & this is already gigabit capable. Everything else in cable franchises are already fibre & they don’t “rely” on openreach. They recently for the first time used BT ducts/poles or if they need access outside of a cabled area
"Ummmmm, let’s start with SKY culture is a light footed, quick thinking, chance taking, impulsive, creative, power house of a disruptor. BT isn’t"
You say that, but Sky are getting squeezed on the content side of things, and under pressure to distinguish their offerings from others. We now have Netflix, Amazon Prime, Disney Plus, Apple Tv, and others moving into this ever crowded space. Content provision is easy with fast internet connections, they just need an app on a smart tv and home users can simply stream the content. VM are heavily dependent on Openreach, not the other way around, so why would Sky merge with VM if there was a chance of a merger with BT? I suspect Comcast must be wondering what they'll do going forward, with satellite needed less and less, as internet bandwidths grow.
BT will cover most of the country with FTTP before the end of this decade, all the current PSTN Exchanges will be gone, with everything converged onto the cloud. VM's HFC network is last generation and doesn't offer upgrades, other than the DOCSYS route, whereas the Terabit bandwidths available on all Fibre local networks, open up all kinds of innovative possibilities.
Off topic, but in the interest of highlighting the capability of Fibre Optic Transmission:
"Researchers at University College London (UCL) have set a new bandwidth record for fiber optic bandwidth transmission. They've been able to communicate through a fiber optic cable at over 178 terabits per second, or 178,000 gigabits per second."
https://www.circleid.com/posts/20200910-a-new-fiber-optic-speed-record/
I'd like to see them get 178,000 gigabits down a coax.
Ummmmm, let’s start with SKY culture is a light footed, quick thinking, chance taking, impulsive, creative, power house of a disruptor. BT isn’t
"For the life of me, a BT / SKY Merger seems ridiculous. I might find myself eating these words, but honestly, to my mind, verging on the impossible. Oil & water, there’s never been a bigger oil & water situation in the history of everything"
Why are they "Oil & water"?
They are fundamentally different businesses. Sky is a media & content provider, and BT is basically a media/content reseller. On the network side of things, SKY rents network and BT provides it. They would fit together like a jigsaw puzzle, with the pieces slotting nicely together. The regulators might have something to say about it though, as it would create a company which would leave the other's at a big disadvantage.
For the life of me, a BT / SKY Merger seems ridiculous. I might find myself eating these words, but honestly, to my mind, verging on the impossible. Oil & water, there’s never been a bigger oil & water situation in the history of everything
I think that BT need a far higher share price before we think about any merger, otherwise BT shareholders could be the ones to lose out with a very undervalued share price/company.
And suprise suprise no mention of jp Morgan comment in papers
But I see the sp advancing in the coming week possibly test £1:60
But let's wait and see ,
As mentioned here bt merger with who I think Jansen wants to keep this closed to mergers
But a bt / sky merger would be interesting
“I bet you a pound to a penny that whatever the pension deficit is the media will take a very negative view on it.”
Agreed, Paddy Power would have paid out by now.
Fleccy.... "Much will depend on the Triennial review headline figure as well."
I bet you a pound to a penny that whatever the pension deficit is the media will take a very negative view on it.
"The truth? No one truly knows - and by no one, I mean the financial media."
Much will depend on the Triennial review headline figure as well.
The 2017 Triennial review came up with a funding deficit of £11.3bn Actuarial (gross of tax). In the Q4 2017/18 results, BT stated an IAS 19 deficit of £5.3bn (net of tax) at 31 March 2018. I suppose it will come down to the trustees and actuaries decision on any funding shortfall going forward, probably based on their forecasts.
why o why do analyst's make predictions of these deficits when it is obvious that you might as well try and predict the end of the world.
it is all worthless guess work.
to think people get paid for this rubbish.
gizza job i could do that !!!
" I must admit my guess of 3 to £4 Billion was probably massively optimistic. "
-------------------
- Well, I wouldn't be too quick to write-off your own guess just yet, as these consensus analyst outpourings are notorious for getting it wrong. It's not their accuracy that's important it's their herd-like consensus direction that's important
- the trend; have they as a herd, increased or decreased the likely deficit?
As it's for an overall increase in the deficit, then that's what the wider market's expectations will be. The analyst's range from £7bn-odd up to £11bn-odd, with a consensus average of £9bn odd. It's all over the place LOL! :)
Just remind ourselves what the annual accounts showed by close last year 2019/20
- it was an incredibly, never-seen-before, astonishing, absolutely astonishing, truly unbelievable, deficit low of only £1.290bn ! ! !
So the pension deficit problem was over, yes?
- No!
- The previous years had been typically £7.283bn,
then £6.964bn,
then that £9.192bn in March 2017,
even as far back as March 2015 the deficit was £7.583bn.
So last year showing it all sorted-out in a snap of the fingers at £1.290bn was simply astonishing.
Fancy footwork was employed to explain although the deficit now looked solved; on paper the deficit was not 'solved' after all, and ever since it's been a case of expect the same fancy footwork to look quite bad this year. Any casual observer would have thought the deficit of that lowly £1.2bn-odd was "normal".
It was nothing of the sort, so although an "increase" of £3bn sounds bad ie.,
""IAS 19 deficit of £4.0bn, net of tax, at 30 September 2020, up £3.0bn since 31 March 2020, reflecting..."
at £4bn that was still, as a total deficit, one of the very lowest ever deficits for many, many, a year. So an increase of £3bn was "relative".
In other words, I agree, a case of H for horrible as well as hard to work out, accurately.
All media analysis has simply taken the forecast deficit from the consensus analysts opinions, as I doubt any run of the mill media analyst is going to sit and waste time working out an impossible to achieve, accurate pension deficit on every single company they do a write-up on.
They don't have time for the hard impenetrable work involved, in coming up with a pension deficit - the pro's themselves, are split between a low of £7bn+ up to £11bn+
So they'll just quote the consensus view.
The truth? No one truly knows - and by no one, I mean the financial media.
"Their mean average is: £9.7bn"
I must admit my guess of 3 to £4 Billion was probably massively optimistic. I noticed from the link, posted by my Mylovelyhorse, that the deficit had increased to £4 Billion, between March 31 to Sep 30 2020:
"IAS 19 deficit of £4.0bn, net of tax, at 30 September 2020, up
£3.0bn since 31 March 2020, reflecting:
– decrease in the real discount rate, reflecting a fall incredit spreads
– partially offset by deficit contributions over the period, and higher than expected asset returns
• Discussions with the BT Pension Scheme trustee on triennial funding valuation progressing; aiming to conclude in first half of 2021
• Considering a number of options for funding the deficit including potentially non-cash contributions"
The £11.3 Billion speculated deficit is identical to the deficit from the last Triennial review, so I would take that one with a big pinch of salt. Since BT have made substantial contributions since 2017, of around £5 Billion, you'd expect some improvement, although it's less than 2 years of benefit payments.
The pension Teach in gave the reason for the drop up the 31st March last year as:
FY 19 Liabilities £60.546 Billion
Benefits closer to payment +£1.391 Billion
Benefits Paid -£2.764 Billion
Discount rate/inflation/mortality -£4.244 Billion
Unexpected deaths/retiree options -£0.318 Billion
-------------------------------------------------------------------
FY 20 Liabilities £54.611
So the biggest impact on the deficit reduction, last year, was changes in discount rate, inflation expectations, mortality assumptions.
I've tried to get an idea of the deficit, but it's hard with a capital H lol.
You'd have to assume that the benefits pay out would be around £2.8 Billion, offset by a 0.9 Billion contribution from BT. If someone's got time it might be worth looking at the discount rate, inflation rate, and Gilt Yields compared to March and Sep 2020, but even then it'd be a stab in the dark.
Out of all the analyst predictions, £7.5 Billion seems the most realistic, but I would have guessed much lower again.
Not sure if this makes any difference but BT promised to look into allowing people who retire in the future to take the pre 2009 and post 2009 pensions separately. Post 2009 is based on career average. Well last week they announced that they would make it possible for people to move the post 2009 pension out of the BT pension scheme but keep the pre 2009 but in (or that’s how I read it). I’m guessing that most people won’t even look into this as they haven’t got a clue and I believe you must have taken financial advice but if people do take it out then presumably the liabilities will be reduced. About 20% of my pension is post 2009 so it’s quite a bit ( to me) but peanuts in the overall scheme of things.
Whilst the pension deficit is a matter investors are well advised to keep an eye on, as too large a deficit is said to badly impact future company expansion plans and the cutting of dividends; it's worth knowing what the market expectations are beforehand.
At the very bottom of the latest consensus forecasts on the last line is their opinion of the likely pension deficit for this year just ended -
https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/latest-consensus/btgroup-consensus-16-apr-2021.pdf
They're forecasting circa £9.75bn
----------------------------------------
Their mean average is: £9.7bn
And their median is : £9.8bn
--------
Only 13 of the in-house brokers analysts contributed (mostly 17 on all other areas) but of those, the worst/most bearish was forecasting £11.3bn !
Whilst at the other end, the most bullish were forecasting . . . £7.5bn
--------
The last RNS by the CEO that included an update on the pension deficit said explicitly to expect a worsening performance (ie., an increase) in the pension deficit for this year just ended/and to be restated this June.
So the analysts and the CEO are as one, in expecting a worsening deficit than reported in previous years - but by how much?
I'm used to seeing £6bn/£7bn as an average in recent years (apart from it almost disappearing at last year's report :)
- with the worst year (the year BT was in the media as having the worst/second worst pension deficit of any company in the whole world, was in year ending March 2017 when the pension deficit came in at £9.192bn - and that hit the financial media headlines around the world.
So if the deficit does come in at market expectations of £9bn+, it's probably not going to set a new bad/low, but a revisiting of the area of an all time bad/low.
I'll be keeping my focus on that maverick bullish analyst who produced £7.5bn, right up until the morning of May 13th :)
£3.95b, taking the payments into consideration.
So its very hard to predict Actuarial valuations against ISA 19 valuations. But look at the table on page 36 of the attached slide pack. In particular the sensitivity analysis in the bottom right hand corner which seems to suggest between 1 and 3.6 billion shortfall.
The openreach stake merely gives the pension first dibs on openreach if BT goes down the pan, it de-risks the pension. Its all smoke and mirrors by the way and down to how long we think humans are living this week??? There are other factors of course that they put into the model....and of course we all have 103% faith in models don't we!
https://www.bt.com/bt-plc/assets/documents/investors/investment-overview/investor-meeting-pack.pdf
My stab in the dark would be £5.3BLN.
Would not be surprised to see it at a small surplus which would allow bt to finally lower there pension contributions which in turn would pay for broadband upgrade.
How does the potential stake of £5B in Openreach affect the deficit? Will there be a guaranteed return that can wipe some of the deficit out? Presumably it will all become clear when results are released in May.
C3 of course it’s speculation, that’s the point
However the deficit is calculated the outcome is pure speculation. Depends largely on the valuation given to investments held by the fund which can vary from valuer to valuer. Most American stocks are way overvalued but if the fund has plenty of Tesla shares or bitcoin it might even be in surplus! Until that particular bubble bursts which it inevitably will.
Regardless of whether the deficit is 7 Billion or 2 Billion the share price will rise. That's my prediction.
I would see either of those a win !!