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Lutz Schüler, its chief executive, wants to sell more combined packages of broadband, mobile and TV, which was the rationale behind the merger. He has earmarked £10 billion to invest in 5G and fibre over the next five years, with some funds used to expand into digital services such as digital health.

That has prompted a revamp of the company’s network plans, with Virgin Media O2 aiming to offer wholesale access to its fixed-line services for the first time. This will help pay for the upgrade and expansion of the network, which is currently focused on urban and suburban areas.

“Consumer wholesale is a complex activity and Virgin Media O2 has no established platform,” wrote Jerry Dellis, an analyst at Jefferies, in a note.

To attract an investment from Sky, Virgin Media O2 would be expected to hive off its fixed-line infrastructure into a separate entity. It would retain a majority stake in the fibre network, while its customer-facing division would, in effect, become a wholesale customer of its sister company.

The split could attract significant investment from infrastructure funds. However, allowing rivals like Sky onto its broadband network could spark an exodus of Virgin Media’s retail customers. Yet with BT ahead of Virgin Media O2 in the fibre rollout race, Schüler, 53, may decide that it is a risk worth taking if he can accelerate the current rate of expansion.

The shifting alliances coincide with the largest wave of investment since the turn of the millennium, when operators shelled out more than £20 billion on 3G licences.

Demand for faster internet access continues to rise rapidly and fibre broadband is seen as pivotal to the government’s “levelling up” agenda.

BT is planning to spend £15 billion on shifting 25 million premises to full-fibre broadband by the end of 2026. It is looking for a partner to help fund the rollout to an extra 5 million homes. The company is facing competition from a rash of new players such as Hyperoptic, CityFibre and Gigaclear, which have raised billions of pounds in investment.

BT is Britain’s largest fixed-line telecoms operator and through EE owns the largest mobile phone network. Since taking over as chief executive in 2019, Jansen, 54, has made it his priority to invest more in BT’s broadband business. The company is in talks to sell its sports broadcasting wing to DAZN, a streaming television service owned by the billionaire Sir Leonard Blavatnik.

BT recently appointed Adam Crozier, the former ITV boss, as its new chief executive. Over the summer, the billionaire telecoms investor Patrick Drahi bought a 12.1 per cent stake in BT and has yet to declare his long-term intentions.

Sky and Virgin Media O2 declined to comment.

Rumours of investment in rival threaten to leave telecoms giant lagging in fibre rollout race

Any alliance between Sky and Virgin Media O2 would be a blow to BT Openreach, its broadband division, as Sky is one of its largest wholesale customers

BT lost as much as 7 per cent of its value today after reports that Sky could soon become an investor in Virgin Media O2’s broadband network.

Sky, the pay-TV operator, is in talks with the recently merged cable and mobile giant, which has ambitions to offer full-fibre broadband to 80 per cent of British homes and businesses before the end of the decade.

Virgin Media O2, which was created by a merger in April, is attempting to tie down wholesale customers on long-term deals so it can step up investment in the faster service. In addition to the Sky discussions, it has entered talks to lease capacity to Vodafone and TalkTalk, according to a report in The Sunday Telegraph.

The prospect of an alliance between Sky and Virgin Media O2 would deal a blow to Openreach, BT’s infrastructure division, and its boss Philip Jansen’s plan to focus its resources on upgrading its broadband network.

Shares in BT fell 4.4 per cent, or 7.60p to 151.79p, by 3pm, having earlier fallen by more than 7 per cent.

Sources said that talks between Sky and Virgin Media O2 have gathered pace recently, but the precise structure of an investment remains unclear.

Under its Project Lightning programme, Virgin Media O2 is planning to run fibreoptic cables to 16 million premises by 2028. However, it hopes to expand more quickly and make fibre available to an extra seven or eight million homes, increasing coverage to four fifths of the country.

The talks are fluid and Sky could buy a stake in Virgin Media O2’s existing network, which predominantly serves customers over cable lines, or invest in the new fibre-based infrastructure. It could opt to sign a wholesale agreement without making a direct investment, sources said.

Sky, which is owned by the American cable and entertainment giant Comcast, is one of BT’s largest wholesale customers. Virgin Media O2 is jointly controlled by Liberty Global and Spain’s Telefónica.

Owning a stake in a direct competitor to Openreach would provide fresh incentives for Sky to move customers away from the former state-owned monopoly, according to analysts.

However, it would be fraught with risk as Virgin Media O2 is in the middle of reshaping its corporate strategy.

Lutz Schüler, its chief executive, wants to sell more combined packages of broadband, mobile and TV, which was the rationale behind the merger.

The streaming platform DAZN is stepping up efforts to buy BT Sport, therefore taking over the pay-TV channel’s rights to show Premier League and Gallagher Premiership rugby matches, according to broadcasting industry sources.

The takeover may have to be approved by the Premier League, however. BT Sport is a major rights holder and such contracts would usually include a change of ownership clause, but it is understood that the Premier League has yet to be asked for its approval.

DAZN’s interest is believed to be two-fold — it would give the platform access to domestic Premier League rights in the UK as it seeks to boost its position in the British market. Buying BT Sport would also give it a ready-made production centre.

The first signs of a concerted effort by DAZN to target the UK came in July when it signed a five-year deal with the promoter Matchroom to cover boxing.

The possible takeover has not stopped BT Sport from pursuing sports rights. It is expected to seal a deal to show England’s Ashes tour to Australia this autumn.

DAZN’s chairman Kevin Mayer hinted at a takeover this week at the Royal Television Society Cambridge Convention, replying “possibly” when asked whether it could buy BT Sport, adding that DAZN “would love to have the EPL”.

Fleccy "Tim, I disagree with virtually everything you've said."

I totally concur, Fleccy. Some of Tim's comments appear to be rooted in the 1980s/1990s i.e. way behind the curve. As for the FTTP rollout it is a matter of public record that BT is forging ahead at a rate unequalled by its collective rivals, particularly after OFCOM lifted its foot off BT's throat. Jansen's mantra "build like fury" is apposite. As for modernising and change, the appointment of Adam Crozier as Chair also bears testament to BT's desire to accelerate that process. And as for TalkTalk (I use them incidentally) they only exist courtesy of BT/Openreach and OFCOM. A slick, redesigned website doesn't make them an existential threat. They are still trying to make up lost ground after their data leak debacle.

I think Tim needs to get up to speed.

Pokerchips
Brexit : "take back control".....has turned out to mean the people have lost all of the control and put it into the hands of total incompetents and whilst the Govt can keep their £7-9B fee to the EU..the people are now having to pay more taxes and go without as supplies dwindle.

Whilst I do not hold any strong views on Brexit (my head voted against leaving, my heart voted for) I would like to correct some of your assertions. Firstly, the government's fee to the EU, after an abatement, was circa £15.5Bn per annum. Secondly, to castigate the government for raising taxes and "to go without as supplies dwindle" without even referencing the elephant in the room, namely the global pandemic, is nothing short of disengenous.

Tim Hoettges, the chief executive of Deutsche Telekom, expects some changes at BT in the next 12 months.

One of the largest shareholders in BT has stoked the uncertainty that surrounds the British telecoms company after Patrick Drahi, the French-Israeli telecoms billionaire, invested in the business.

Tim Höttges, chief executive of Deutsche Telekom, said yesterday: “I would say that in the next 12 months something is going to happen with the asset because the shareholder side is changing rapidly.”

Drahi, 58, the founder of Altice, the French telecoms group, revealed in June that he had a 12.1 per cent stake in BT, making him the largest shareholder after Deutsche Telekom, which has a similar holding.

He reassured BT and the government over his plans by committing to not making a takeover offer, but questions remain over the future of BT. Drahi’s commitment, binding him to City takeover rules for six months, is due to lapse in December, just as Adam Crozier takes over as BT’s chairman.

Höttges, 58, also suggested that Deutsche Telekom was weighing options for its stake in BT and that it expected developments within the next 12 months.

BT’s shares have more than halved from about 442p when it agreed to buy EE, the mobile provider. The stock fell ¼p, or 0.1 per cent, to 164¾p yesterday.

The tests are piling up for the government’s free marketeers: Advent’s £2.6 billion bid for defence outfit Ultra Electronics; Nvidia’s mooted $40 billion takeover of Arm; the £7 billion US ding-dong for Meggitt, the supplier of kit to the F35 and Typhoon fighter jets.

But could there be a trickier test to come: a bid for BT, or at least a break-up offer for its broadband wing Openreach, so crucial to Boris Johnson’s “levelling up” and “digital” Britain agendas? The chances of some sort of action have risen since June’s wake-up call from Patrick Drahi, the French-Israeli billionaire behind private telecoms group Altice, who secretly snapped up a 12.1 per cent stake in an adroit coup. BT shares closed at 195.5p that day, subsequently topping £2. But Drahi can’t have missed them since dropping to 168.7p.

Even there BT is a big bite, valued at £16.7 billion. And when he took his stake, Drahi said he held BT’s management “in high regard”, backed their strategy and did “not intend to make a takeover offer”. But that promise is only good for six months. And a man not spooked by debt-fuelled deals has form in wanting to own stuff outright.

To boot, BT’s second biggest investor, Deutsche Telekom with 12.06 per cent, has been stirring things up. This month its boss Tim Höttges used an earnings call to declare Deutsche “a little bit kingmaker here”, while predicting an “exciting fourth quarter”.

Deutsche has a board seat. But, tellingly, Drahi hasn’t asked for one. Is that to give him more room for manoeuvre come December, when new chairman Adam Crozier arrives and Drahi would be free to bid? True, it’s unclear whether he could raise the money. But Crozier’s first task looks to be establishing what BT’s two top investors are up to.

And a lower BT share price doesn’t help. OK, it’s up 50 per cent from the bombed-out levels of a year ago, amid signs that investors are finally buying into the land-grab strategy of chief executive Philip Jansen: one built on a £5 billion-a-year spend to bring full fibre links to 25 million premises by December 2026 versus 5.2 million today.

Share price wobbles must be expected, too, for such a capex-heavy rollout at a group with £17.8 billion net debts. Jefferies analyst Jerry Dellis attributed recent weakness to a “read across to the value of Openreach” from the latest “low” valuation of far smaller rival CityFibre. Extra competition from newly merged Virgin Media O2 won’t help either.

But, on Numis forecasts, BT is now trading on an earnings multiple of 8.7 times. On the returning 7.7p dividend, the yield’s 4.6 per cent. So, not overly pricey for a group whose fibre rollout has political and regulatory support, even allowing for an £8 billion pension deficit that is looking more manageable lately. Yes, a full bid may be beyond Drahi. But you doubt he bought in to be a passive investor. Even a play for Openreach could prove an early test of the government’s new National Security and Investment Act.

Shares in BT fell to the bottom of the FTSE 100 amid talk that one of its smaller rivals was looking to raise money at a lower valuation than had been expected.

CityFibre, which is competing with BT’s Openreach business to build its superfast fibre-optic network, is said to be close to selling a £500 million stake to a couple of investors, including Mubadala, Abu Dhabi’s sovereign wealth fund.

The mooted stake sale, according to The Wall Street Journal, will value CityFibre, which is backed by Goldman Sachs, at about £2 billion. It seems that many in the City had thought it was worth more than that.

“Feedback today suggests the value at which CityFibre is reportedly willing to sell equity is considered to be low,” Jerry Dellis, a telecoms analyst at Jefferies, noted. “This is being read across to the value of Openreach.”

There has been much talk of BT spinning off Openreach, and a lot of its potential valuation — as much as £30 billion, Jefferies reckons — was baked into the share price earlier this year. The worries that it might not be worth as much as thought dented its stock, which lost 5¼p, or 3 per cent, to 168¼p. The fall left BT’s shares down by almost a fifth in the past two months to their cheapest since May.

My personal view is that the low price reflects more on CityFibre's long term risk profile in the face of ongoing and intensifying competition from BT. But hey, what do I know.

What I find hilariously farcical about this latest bout of lazy Berenberg analysis is that there is no reference to future hotspots in telecoms, namely Cybersecurity, IoT and the inevitable uptick in global corporate and institutional investments, post pandemic. That is aside from the observations already made about the crushing financial pressures on altnets, as they are forced to ramp up investments to compete. All in all their forecast belongs in La La Land.

Fleccy - "Looks a bit rubbish to me with a reported profit after tax of £2m"
Fleccy - I wouldn't read too much into this figure, as BT was hit by a one -off tax charge

The effective tax rate was 18.2% on adjusted1 profit, based on our current estimate of the full year effective tax rate. There was a one-off tax charge in the quarter of £439m to reflect the remeasurement of deferred tax balances following the enactment of the new UK corporation tax rate of 25% from April 2023. As a result, reported profit after tax was £2m, down £446m.

Adjusted EBITDA up 3%, Revenue down 3%. Usual mixed bag of stats, but green shoots of recovery evident.

Billionaire Patrick Drahi ‘will not force BT into Openreach deal’
Alex Ralph
Tuesday June 29 2021, 1.02am, The Times

There was speculation that Patrick Drahi had a hidden agenda. The telecoms industry tycoon who recently became the largest shareholder in BT will not push for the sale of a stake in Openreach or for an investment partner to accelerate its multibillion-pound full-fibre broadband expansion.

Patrick Drahi, the Franco-Israeli billionaire, caught the City by surprise this month when he revealed that he had acquired a 12.1 per cent stake in Britain’s largest telecoms group, worth £2.2 billion. Drahi, 57, met BT’s management in London last week and reiterated his public support for BT’s strategy of investing heavily in full- fibre broadband.

Drahi built Altice into a telecoms, media, entertainment and advertising group in a series of leveraged deals and also owns Sotheby’s. His investment in BT raised speculation that he had a “hidden strategy agenda”, such as pressing BT to sell a stake in Openreach, its broadband infrastructure division, or a spin-off.

BT, the former state monopoly privatised in 1984, also owns the EE mobile network and the BT Sport broadcast network.

Under Philip Jansen, its chief executive, BT last month committed to accelerating its full-fibre supply to 25 million premises by December 2026 after receiving clarity from Ofcom, the regulator, over the potential returns. It was exploring the option of a joint venture to help to fund the additional five million premises, costing about £3 billion.

Jansen, 54, told The Times CEO Summit last week that he had an “excellent” relationship with Drahi, who saw “huge potential” in BT.

Shares in BT were down 4¼p, or 2.1 per cent, at 199¾p last night.

What a welcome sight.

I see our resident Deutsche Bank 'glass half full' analyst has reiterated his Sell advice, with a target price of £1.40. It would appear that Drahi's 12%+ stake has not moved this analyst's depressive persona one iota. He sounds like the life and soul of the party....NOT.

DZ BANK RAISES FAIR VALUE FOR BT GROUP TO 240 (210) PENCE - 'BUY'

I hear the analyst in question has taken up a career enhancing position at the end of Brighton Pier, with specialisms in crystal balls and tea leaves.

Target price for BT Group raised to £2.20 - Overweight

JPMORGAN CUTS BT GROUP PRICE TARGET TO 225 (230) PENCE - 'OVERWEIGHT'
BARCLAYS RAISES BT GROUP PRICE TARGET TO 220 (190) PENCE - 'OVERWEIGHT'

Jansen achieves a better reception
Alistair Osborne
Friday May 14 2021, 12.01am, The Times

That’s one way of putting it: “A number of uncertainties have now been removed.” Or so says Philip Jansen, the BT boss. And what better one than this? Whether it would be him getting turfed out of the company or the chairman Jan du Plessis.

All that got resolved in March in delightfully messy style. And while Jansen denies he gave the board an “ultimatum”, the boardroom brouhaha does seem to have triggered a rare run of decent form. Since then, the telecoms outfit has paid such a low price for its EE mobile wing’s 5G spectrum that Ofcom returned £227 million of its £702 million deposit. Then the regulator came over all compliant on the “WTF, Mister” front, or “WFTMR” if you read it properly, which apparently stands for Wholesale Fixed Telecoms Market Review: a verdict that allows BT higher returns for rolling out full-fibre broadband.

And now look. First, the triennial deal on the pension deficit, coming in at £8 billion, or “£2 billion below consensus” and requiring “lower cash payments”, according to Jefferies analysts. Plus, a rollover deal on Premier League media rights, which means no extra cash from BT Sport to football agents.

So is all this happening because du Plessis is off? Of course not. As Jansen puts it: “There is no massive fallout. I get on very well with Jan and I thank him for all the support he’s given me.” Besides, he’s not “leaving any time soon”. Yet, ask Jansen if it’s true that he wanted quicker change at BT than the chairman and there’s a telling “maybe”, plus the line that he’s the type who “wants to crack on and get things done”.

Hence, perhaps, the eye-catcher that came with the Covid-hit full-year figures, where pre-tax profit fell 23 per cent to £1.8 billion on sales 7 per cent down at £21.3 billion. Jansen is speeding up the fibre rollout for its Openreach broadband wing from 20 million to 25 million premises by December 2026 — a big jump on the 4.6 million today. Creating 7,000 jobs, it’ll raise BT’s annual capex spend to around £5 billion: one reason the shares fell 6 per cent to 159p.

It’s the right call, too. The chancellor’s 130 per cent tax super-deduction helps. Ditto, a pension deal that unlocks £1 billion of tax losses. And while Jansen says BT has the clout to go it alone and also fund a progressive dividend returning at 7.7p, two things could help: a joint-venture partner for the five million extra premises and flogging a chunk of BT Sport.

Jansen’s rightly spotted that it may require financial flexibility to turn BT into what it’s taken too long to become: a converged platform business, built on fast broadband and 5G, hosting everything from cloud computing to streamed TV. True, the shares lag the 215p of his arrival in February 2019. And his promise of “consistent and predictable growth” must be taken on trust. But there’s something to like about his BT vision.

Thanks, Rod. I'll put the horse's head back in the freezer.