Member Info for fleccy

In the 2019/20 results BT changed its account reporting from IAS 17 to IFRS 16, which required them to report lease liabilities as debt. It isn't that they took on more debt, they just added lease liabilities to their Net Debt.

https://docs.google.com/spreadsheets/d/e/2PACX-1vT9QSJLCLsX6T89ZgHveSfCfrkN6UMjt1Oy-i2q05SuZccRMXVRyWBtySHaU-3JAIE8q86RPF75GpTo/pubchart?oid=1485680182&format=interactive

If you look at the chart link above, there's a jump in Net Financial debt of £4.726 Billion between 2015, this was due to "increase in the year primarily reflects £3.5bn for the cash element of the EE acquisition, £2.1bn of acquired EE net debt, dividend payments of £1.0bn, pension deficit payments of £0.9bn and £315m for the buyback of 68m shares. These were partially offset by reported free cash flow of £3.1bn. In March we issued £3.0bn of euro denominated bonds to part-repay the £3.2bn drawdown on our £3.6bn committed acquisition facility". The EE acquisition increased Net Debt from £5.119 Billion to £9.845 Billion in 2015/16. By 2019, Net Debt rose to £11.035 Billion due to Pension contributions, but in 2020 BT changed their reporting from IAS 17 to IFRS 16 and the reported Net Debt jumped from £11.035 Billion to £17.907 Billion reflecting an additional £6.56 Billion in lease liabilities. On the chart Lease Liabilities are shown in Green and are reducing year on year, probably due to the building closure program. The Total Net Debt didn't reflect the reduction in lease liabilities, probably due to Pension contributions.
I expect lease liabilities to decline over time, leading to cost savings and a subsequent reduction in Net Debt and an increase in EBITDA. If the BTPS has gone into surplus on the back of an increase in Gilt Yields, BT could see reductions in contributions going forward and eventually receive cash back from the Co-Investment Vehicle.

"Stagnant equity prices, collapsed £, international mistrust in UK politicians - all leading to reluctance to invest in the uk economy. Brexit was sold on a lie - great trade deals, reduction in immigration - none of it happened. Was never going to happen."

Being a member of the EU wasn't doing much for the UK either, with predatory German and French companies moving in and taking over many utility companies. When the utilities were taken over, the companies made sure they took a good chunk of dividends to recoup their purchase costs. I'm talking companies like RWE, EDF, Veolia, etc.
The UK was never going to join the Euro after Black Wednesday, when sterling collapsed on the back of being shorted by the likes of George Soros and comments by Bundesdbank President Helmut Schlesinger. It's ironic that George Soros was one of the most active and vocal campaigners against Brexit, since he is likely responsible for the UK keeping the EU at arm's length ever since he earned the title as the "Man who broke the Bank of England".

"More people are selling than buying gilts, so BT is going to be sold off too."

We've previously hammered the subject of BT being taken over, and although I would profit from such an event, I don't see any chance of that happening.
The Government won't allow a foreign takeover and I can't see any UK entity big enough to takeover BT. Psychologically, I don't believe a takeover of BT would sit well with the UK public and media, and although the media love to hate BT any Government overseeing the end of yet another "great British Institution", would be shamed and flogged by public opinion.
I could see Openreach being spun off once the pension scheme is in surplus and the Trustees organise a pension insurance buyout. BT will likely keep hold of the fixed assets like Fibre, poles, ducts, etc, but the Openreach workforce could easily be packaged into a third-party outsourcing company, with a valuation based on the various network management contracts they service. If you look at the way things are going, with Altnets utilising BT ducts with their own Fibre and Openreach looking after the various different customers, the writing is on the wall that Openreach will become a company in its own right once the pension scheme is no longer an issue.

"So now we are under 120p following the FT100. Fall started just after noon and has accelerated since then. Wonder why, what ,who. Any clues out there ?"

UK stocks are an easy target in my opinion and the big market players have decided to drive the prices down. Vodafone's dropped below £1, and Lloyds are currently down 5.84%. I intend to continue reinvesting dividends as and when I receive them, bringing down my average cost per share over time. The lower the prices the more stock I can I buy, the more dividends I receive, the more stock I can buy, the more dividends I receive and so on.
It's clear that prices will recover at some point in the future, so assuming one's confident in their stock pick's and unleveraged, there isn't an issue for the long-term investor with a dividend reinvestment strategy.

"Most beneficiaries are higher paid. As that’s the main bulk of workers. They are receiving 3.5-4% pay
There is such a thing as unity, standing together. You wouldn’t know because you’re only concerned with your capitalist self.
It isn’t just about this years pay rise, it’s about future pay rises and precedent for future negotiations."

To deal with the content of your last post.
In virtually every interview and article I've seen, the CWU and strikers have banged on about staff foodbanks, even calling Jansen "Foodbank Phil", so the narrative from the union is all about the lower paid staff, not higher paid staff.
As far as me being a capitalist, I'd say I have mixed views between capitalism and socialism. I neither believe in unfettered capitalism, or unfettered socialism, as both are bad and don't work. Unfettered socialism is probably actually communism, breeding stagnation, inactivity and lethargy. History has proved communism makes populations lose the will to be productive and improve, since what's the point of working hard if you're not rewarded?
The right type of Capitalism ensures that hard work and ambition is rewarded fairly over time, but unfettered capitalism breeds corruption as much as communism, except in unfettered capitalism it's about money and in Communism it's about power. Unfettered Capitalism is what happens in the predatory financial industry and stock markets, not in companies like BT.
As far as future pay rises are concerned, the only real way to ensure big pay increases is by promotion or moving jobs and advancing by challenging yourself through change. Going on strike will make little difference to future pay increases, working hard and earning promotion could bring big rewards.
There's very little hope the union will win with BT strikes, because telecom networks are like clocks that only needs winding up occasionally, they'll just tick along for ages if left undisturbed on the table.

If it wasn't for the articles in the socialist worker and press releases by the CWU, coming up in Google searches, I wouldn't have even noticed a strike had happened. My internet connection has worked flawlessly Friday and today, as has my mobile phone service, we don't use a landline but I'm pretty sure that would have worked too since I'm on FTTC. I don't see the point of this strike, since the most affected by the across the board £1500 pay award are the better paid staff: The lower paid staff already received quite close to 10% anyway and are likely suffering the most due to loss of pay on strike days.
Before the across the board pay increase, let's assume someone was on £20,000 a year:

£20,000 + £1,500 = £21,500 (7.5% increase)

The union are pushing for a 10% increase:

20,000 +10% = £22,000

Therefore, someone on £20,000, pre £1,500 increase, will be £500 per annum better off with a 10% increase.

Not taking Pension contributions and NI into account:

£20,000 = £337 Take home per week
£21,500 = £356 Take home per week
£22,000 = £363 Take home per week

The difference between the current £1,500 and 10% pay increase is £7 a week, or £1.40 a day, with the current strikes costing them £71.20 a day in lost earnings. By the end of October someone previously on £20,000 a year, pre £1,500 pay rise, will have lost 8 days' pay totaling £569.60.

I don't think they will, but let's imagine the BT management give in and decide to up the pay increase to 10% starting November, the people now earning £22,000 per annum will see an increase in pay of the £7 per week. Lost pay/weekly pay increase = £569.6/£7 = 81.4 weeks to recover pay due to lost wages, so, it will take over 18 months to break even from the strikes based on 8 days lost pay up to the end of October alone and the more days they're on strike the worse off they become.
If the CWU win, which I doubt they will, the main beneficiaries will be the higher paid staff, not the lower paid staff who are losing a significantly higher percentage of their pay due to the strikes. In my opinion this isn't about rewarding the lower paid staff, that's a false narrative the union are pushing, as the lower paid appear to be losing the most and have the least to gain from striking.
I'll happily be corrected if any of the above figures are incorrect but as things stand, I'm at a loss to understand how someone using "Food Banks" can afford to lose £569.60 over the span of two wage packets,

"Increasingly, investors are warning the vast amounts of funding going into Britain’s broadband could lead to “overbuild”, where multiple networks compete for the same areas, making it more difficult for smaller challengers to survive.
A report by the Internet Service Providers Association, which includes BT, claimed the “sheer number of companies building networks is unsustainable”, adding the market had reached “saturation”."

The end of the article isn't wrong, much of this investment is risky in the extreme. Once they put the Fibre in, they then have to attract enough customers to finance the day-to-day operating costs, like wages, repair contracts, backhaul capacity, Head End equipment, etc, etc, etc. Many of the smaller altnets hoping to profit from a consolidation wave, may not be in geographically convenient locations to attract takeover interest, especially if the areas are already covered by competing networks. Consolidation would require the acquirer to connect the new network into their existing network through new backhaul capacity, as well as interconnect different network management systems, not impossible or cheap and would only be worthwhile with a substantial customer base. The Altnets are also one trick ponies, they don't have a mobile network or enterprise business/expertise to supplement their broadband businesses.
On the one hand, the market and financial media lead us to believe that BT merits a bargain basement valuation, yet Billions are being thrown at upstart Altnets entering the most competitive Telecom market in the World, what could possibly go wrong?

"Fleccy has been adding lots of meat to the bones of this story for months."

I have mentioned Net Neutrality issues a couple of times lol. The point Telco's are making, is the content providers are effectively forcing them into constant upgrade cycles and relying on CP's to shoulder upgrade cost as more bandwidth hungry applications become available.
Terrestrial and satellite TV broadcasters have to pay the transmission infrastructure providers, and It probably costs Broadcasters a pretty penny for Terrestrial channels; It isn't as though companies like Arqiva will offer and maintain the service for free.
The argument the end user pays the Telco's for a service doesn't exonerate content providers, as bandwidth across the network isn't an infinite resource, and the Telco's have to build in capacity to maintain a good Quality of Service on all traffic.
The content providers rely on competition between CP's, forcing them to upgrade bandwidth as required, allowing the content providers to receive a subsidised service; All this raises big questions, should the Telco's raise their broadband prices to subsidise Netflix, Amazon, Disney, etc traffic, so granny who checks the weather forecast twice a day pays the same as a family streaming films in two rooms, with the kids gaming in their bedrooms? Or should the end user pay a little more to the content provider, so the content provider can pay Telco's to provide a better QOS to carry their high bandwidth content?
In our home, we have Netflix, Amazon Prime, Disney, and also use Sky Go a lot, all on a 35mb FTTC service and it works fine for us as an SD service; The broadcasters want the Telco's to be able to carry all their future 4K and "metaverse" content and upgrade network as required to offer a good service, but at no extra cost to the content providers, no wonder they love net neutrality.

"Vodafone could cut debt with Three mobile deal but CMA approval 'hard to see' - broker"

https://www.proactiveinvestors.co.uk/companies/news/994543/vodafone-could-cut-debt-with-three-mobile-deal-but-cma-approval-hard-to-see-broker-994543.html

"This for me makes it difficult to understand the 51% to 49% proposed split of the combined UK operations. Should be more like 75% to 25% imho, perhaps Vodafone’s cable networks are not part of the combination but if so why are Vodafone promoting the potential to speed up broadband rollout as a benefit of such a merger?"

Hard to know how the deal will be structured, but the number crunchers will work hard to ensure all the different parts are valued correctly. Vodafone also own, or partner, various subsea assets around the World, like Apollo in Cornwall, I assume these won't be part of the deal. Vodafone UK's assets are likely more numerous and valuable than Three UK's assets, so a deal might involve Hutchinson taking current debt onto their own books, or injecting cash into the new company to meet the valuation differences between the two entities.

"Virgin-O2 merge would be a better comparison"

Nope, Virgin Media was a cable operator and O2 a mobile company. The VMO2 combination is directly comparable to the BT/EE combination, the VOD/Three combination is a combination of mobile entities. Vodafone UK took over Cable and Wireless Worldwide around 2012/13, so the Vodafone UK company structure already mirrored the BT /EE structure, Vodafone UK merging with Three UK would be no different to BT/EE or VMO2 merging with Three UK.

This had a mention on CNBC this morning, with a suggestion that the BT takeover of EE will somehow persuade the regulators to look favorably on Vodafone UK/Three UK merger. There are big differences between the BT EE takeover and a Vodafone/Three merger. When BT took over EE, BT didn't have a mobile network, so it was a combination of different entities offering a different product, whereas a Vodafone/Three merger would be a combination of two mobile companies, the regulator would take a different view on that. I'm not saying the regulator definitely won't allow it, but there's no comparison with this situation and the BT/EE combination.

"As an example 15Bn is supposed to be in corporate bonds and the UKs bond index has fallen 23% as interest rates rise to combat inflation (thanks Mr Putin)"

Indeed, the year to date is down 23%, but the 10-year annualised return is actually up 1.82%.

https://www.spglobal.com/spdji/en/indices/fixed-income/sp-uk-investment-grade-corporate-bond-index/#overview

I'm pretty sure the investment window considered by the Trustees will be greater than 1 year.

"Next June's 3 year valuation should be interesting."

It's impossible to know how the BT Pension Fund is doing, there's a lot of different parts making up the whole.

The top three are:

Bonds, cash & secure income totaling £36.478 Billion, consisting of
Investment grade credit £14.437 Billion
Secure income £3.675 Billion
Government bonds and cash £18.366

Pooled investment vehicles totaling £12.728 Billion, consisting of
Equities £29 Million
Bonds £1.351 Billion
Hedge funds £5.150 Billion
Liquidity funds £1.577 Billion
Mature infrastructure £667 Million
Private equity £1.666 Billion
Property £2.288 Billion

BTPS passive and managed Equity investments £10.252 Billion

They also state:
"Interest rate risk
The Scheme is subject to interest rate risk on bonds, pooled investment vehicles, loans, derivatives, deposits and short-term investments. The Trustee hedges Scheme liabilities on a sensitivity basis as part of the investment strategy. Under this strategy, if interest rates fall, the value of these investments will rise to help match the increase in actuarial liabilities arising from a fall in the discount rate. Similarly, if interest rates rise, investment values will fall in value, as will the actuarial liabilities, because of an increase in the discount rate."

So, the actuarial liabilities will fall in line with the asset value of the Gilts, due to an increase in the discount rate.
I'd hazard a guess that the BTPS wasn't one of the DB pension funds affected by the recent LDI turmoil. If the BTPS isn't now in surplus, with the increase in Bond Yields, then the trustees need to take a serious look at their investment strategy. The recent drop in Equities may be a bit of a dampener.

"Wonder how much this has been behind BTs recent fall - in scramble by Pension Funds for easy access to funds ?"

I wouldn't have thought so, if you look at the 2021 BTPS accounts document I linked to in a previous post:

https://www.btps.co.uk/MediaArchive/SchemeSite/BTPS352_BTPS_Report_and%20Accounts_August2021_V17_30Sept.pdf

BTPS manages its own LDI portfolio and it appears that they reduced their derivatives dramatically from 2020 to 2021, in 2020 they had £2.792 Billion reducing to £692 Million in 2021. A new entry appeared for 2021 labelled as a "Special purpose vehicles" with £1.430 Billion invested, which may have taken a chunk of the cash previously invested in derivatives.

"Special purpose vehicles
In accordance with the Pensions SORP, the ABF arrangement described in the Report by the Trustee is classified as a special purpose vehicle. Special purpose vehicles entitle the scheme to receive a stream of cashflows over a fixed period. The Scheme’s right to receive these cashflows ceases in the event the Scheme becomes fully funded before the end of the fixed period. Special purpose vehicles are valued using a stochastic valuation approach that considers the time value of money and the probability of the Scheme becoming fully funded before the end of the fixed period. Distributions from the special purpose vehicle are treated as either income or capital receipts in accordance with the agreement between the Scheme and the Scottish Limited Partnership through which the arrangement is conducted"

"Assets have lost value, inflation linked liabilities increased, but the discount rate used has increased significantly. Most UK pension schemes probably haven't perfectly matched their liabilities using LDIs, so will have a higher reduction in liabilities than assets. FWIW my guess is that the scheme has improved its position."

Totally agree on the assets; Higher gilt yields on the back of a reduction in the price of gilts, mean asset value of gilts held should have decreased. Liabilities have reduced by more though, hence the possible decrease in the deficit which may now be a surplus.

Getting back to the original theme of this thread, are there any accountants on here who could shed light on the surplus/deficit question?
There are two documents that might help, the 2020 pension teach in and the BTPS 2021 accounts:

https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/quarterly-results/2020-21/pensions-teach-in-presentation-slides-july-2020.pdf

https://www.btps.co.uk/MediaArchive/SchemeSite/BTPS352_BTPS_Report_and%20Accounts_August2021_V17_30Sept.pdf

Equity prices have recently decreased, but Corporate and Government Bond rates have increased. The truth is, only the Trustees and BT will currently know the likely Surplus/deficit status, but it is probably important to have an idea from an investment point of view, as the media/market use the pension deficit as a stick to beat BT with.
Going off the formulae in the Pension Teach in, I would guess the scheme is in surplus, since April, based on the increase in corporate and Government Bond Yields taken in isolation, but the drop in Equities will take some off the cream off that.
I'm probably totally wrong, but it's nice to think the pension scheme may now be in surplus.

"The strike action and dispute with the unions is what's hitting the share price"

The strike action and dispute with the unions has nothing to do with the share price decline.
The share price was initially hit with a speculative story, about VMO2 buying TalkTalk, released on the 15th of July and knocking the share price down from 191.1p to 175.65p at the close, a drop of 8%; Next the price declined by a further 8% on the 28th of July when the results were released, which were reasonable results in my opinion. The rest of the declines were due to drift down on macro sentiment, with declines mirrored in Vodafone's share price, as can be seen on the 6-month chart below. Since BT's share price is higher, the macro decline was double Vodafone's, but the slope is obvious.

https://www.google.com/finance/quote/BT.A:LON?sa=X&ved=2ahUKEwifq5aC8Lv6AhVlSkEAHTSSBPUQ_AUoA3oECAMQDQ&window=6M&comparison=LON%3AVOD
https://www.google.com/finance/quote/BT.A:LON?sa=X&ved=2ahUKEwifq5aC8Lv6AhVlSkEAHTSSBPUQ_AUoA3oECAMQDQ&window=6M&comparison=LON%3AVOD

What's happening with the VMO2/TalkTalk takeover? Nothing I can find, which is what I expected since the story seemed unlikely anyway; So, a speculative story coming from nowhere knocked over 8% off BT's share price, go figure. As I said in a previous recent post, I've recently added another £7k's worth of BT stock at 123.55p and I'll keep reinvesting dividends, as they become available, where I see a bargain basement valuation.

"Any more information on "BT just issued RNS on Total Voting Shares""

It's just the end of month Voting Rights disclosure.

"he republic of ireland are still in the eu with freedom of movement of people , in the single market [ better trading arrangements] they cant get staff for the hospitals or to pick the fruit ,wait on tables ,fill the shelves ,or pull a pint"

The ROI could be likened to a remora fish, it survives by attaching itself to larger bodies and lives off the scraps. A fall in sterling against the Euro has a disproportionate effect on the ROI's economy and because of the ROI's geography it will always depend on trade with the UK.
The argument about interconnectors connecting the ROI's power grid directly to the EU and increasing ferries to the EU won't change the fact that the ROI economy will always be a subordinate to the UK economy.