Member Info for fleccy

Goodbye RYA. Now removed from London Stock Exchange.

"Zib. All project lightening builds are full fibre, including the original 3-4 million premises. It’s not correct to equate DOCSIS with co-ax cables any more."

True FTTP is IP, not DOCSIS; RFOG isn't strictly speaking FTTP either. A true FTTP network is passive from the head end to the customer premise, and consists purely of OLT's, ONT's, and Fibre splitters, with no active on street equipment, except maybe under exceptional circumstances.

"Customer installation costs will be in addition to this, with installs operated on an on-demand basis."

"Just to clarify, VMO2 will continue to run their existing HFC network until 2028 and even beyond, thus what they’re doing here is deploying FTTP through their existing ducts and across the same coverage area, which is more about preparing for the decades ahead"

https://www.ispreview.co.uk/index.php/2021/07/virgin-media-o2-to-replace-existing-uk-network-with-full-fibre.html

VMO2 have estimated the cost of its national rollout at approximately £10 Billion, and Lightreading have estimated £1.43 Billion for the cost of Fibreing to the street on the current DOCSIS network, but they also reckon that the cost will increase significantly for customer connections; I also expect that they'll spread the cost and initially Fibre to new customers, or customers requiring upgrade for other reasons; This may delay the retirement of the DOCSIS network, so they'll have to effectively run two seperate networks for a while.

"Under an ambitious scheme announced today, Virgin plans to upgrade its entire network to full-fiber technology by 2028 at an estimated cost of about £100 (US$140) per home passed. That is about £40 ($56) more than it would have to spend on an upgrade to DOCSIS 4.0, the latest the cable industry has to offer. But Lutz Schüler, Virgin's boss, appears to have decided that DOCSIS 4.0 is not worth the effort or expense.
Over a seven-year period, an investment of £1.43 billion ($2 billion) – £100 multiplied by 14.3 million homes – works out to be just £200 million ($279 million) annually, roughly a fifth of what Virgin normally pumps into capital expenditure each year. The full cost is likely to be significantly higher, though. Virgin admits that it has not specified the additional installation costs, performed as and when customers demand a service, in its public statement."

https://www.lightreading.com/opticalip/fttx/virgin-dooms-docsis-in-uk-with-fiber-for-all-plan/d/d-id/771160

Thanks Larry. I still disagree with his assertion that “We were carrying out the biggest telecoms merger in UK history ever”

"Holy Moly Fleccy it’s a big one, I’ll risk Rod’s wrath and post it."

Nice one :-)

"I’d also read his analysis but I doubt he feels encouraged to respond to a post saying he should be ignored and his thoughts treated as something to be deposited in the spam bin."

It's clear to anyone who follows BT, that £2 wouldn't cut it with shareholders, or the BOD. If BT was a distressed company, struggling with debt repayments, then I would probably agree with that lowball figure, but BT aren't struggling. The majority of the media coverage citing BT's debt and pension deficit, exaggerate the implications.
Any bid for BT would have to reflect a sum of the parts valuation, and subtract the debt. As of September 30 2021, BT's Net financial debt was £12.253 Billion with Lease Liabilities of £5.988 Billion adding up to £18,241 Billion Net Debt; The Pension deficit, under IAS 19 net of tax, was £4.3 Billion, so not as big an issue as the media would lead us to believe.
VMO2 are starting out with around £18 Billion of Financial Debt, and are planning to spend at least £10 Billion on FTTP, with less revenue than BT. BT are clearly in a better position than VMO2, and would be a much safer bet if both were publicly traded. BT gets stick while VMO2 are left alone, due to BT being publicly traded, and there being no potential profit in trashing VMO2. IMO.

I think Mr Schuler forgot about the BT/EE Merger. In terms of market cap BT was valued at over £40 Billion, with EE valued at over £12 Billion, at the time of the BT/EE merger, so how does the VM/O2 merger even come close to the BT/EE merger? In terms of Revenue, BT/EE currently generate nearly twice the revenue of the combined VM/O2 entity, so again I don't see how his statement has any basis in fact. Probably had something to do with him being in a Rose coloured bedroom when the deal was made.
I can't read the full article, as it's behind a paywall, but I suspect he didn't clarify the statement further in the article. Maybe it's one for Factcheck.org

“We were carrying out the biggest telecoms merger in UK history ever while I was in this rose [pink] bedroom,”

https://www.thetimes.co.uk/article/virgin-media-02-boss-lutz-schuler-interview-telecoms-titan-take-on-big-tech-q9gwz705k

Butmac is correct in one thing, Zebbo's post is one to be ignored, and deposited in the spam bin.
Zebbo I'd be interested to read your analysis into why BT is worth no more than £2? I'll carefully read your analysis and give an honest opinion in return.

"Another one of many Zeppo posts on a multiude of different companies. Here's another 6th Sept 2021."

Ahh he means Zebbo, not zeppo, still has no bearing on BT.

"Personally done see an offer over £2 PS. Thats being realistic all things considered.
Some people I fear are wearing rose tinted specs"

My specs are detecting spam.

"Another one of many Zeppo posts on a multiude of different companies. Here's another 6th Sept 2021."

Are you sure you're on the right Forum? I just looked at Zeppo's history and couldn't see any posts about BT, or a post on the 6th Sep, and what's ECR got to do with BT?

"possibilities it would take a couple of years to find a solution so I guess that tends to rule out some of the PE options as they seem to look for quicker results. Thanks for the explanation."

Reading between the lines, I think there is a plan to completely spin off Openreach, but it will only involve the workforce, and wont happen until the BTPS Trustees have facilitated a buyout of the Pension Scheme.

"“We see our role as managing the funding risk in the scheme, and building towards a DIY buyout,” says Naylor, who has been with the scheme for 12 years. Prior to that, he was working for Hermes, with responsibility for building a fund of hedge funds portfolio. "

https://www.ipe.com/interviews/how-we-run-our-money-bt-pension-scheme/10049824.article

Once the pension scheme is bought out, which is clearly the plan, BT could possibly IPO 49% of Openreach, put 2% into Escrow, and retain 49%. The new company would have it's own board, as it does now, and will probably come with contractual obligations from BT to use them, which would make sense since BT would own nearly half the new company anyway. The valuation would be based on guaranteed revenue streams from current operations, and future projected income from Provisioning and Maintenance operations.
As Zibrahimovic stated, nothing is likely to happen until the FTTP and 5G Fibre to the cell is completed, around 2026/27. I suspect the pension deficit will be resolved before 2030, so I expect BTPS will be bought out, and Openreach possibly spun off before 2030. The only other thing, I can think of, that might slow things down after 2026/7, is the speed of movement from FTTC to FTTP, and the Exchange closure program.

"Z, can you explain why you remain convinced that assets could not be assigned from BT to OR to facilitate a sale. "

I'll have a go at this one.
Reason 1
Openreach and BT employees are both members of the BTPS, separating them off will be extremely difficult while the pension deficit is financed by BT.
Reason 2
When BT agreed to separate off the Openreach workforce, under its own independent Directorship, it was decided that the Infrastructure and cables/Fibre would remain under BT Group ownership, due to legalities around Wayleaves and access agreements. It isn't as simple as just transferring ownership of the assets, it would probably involve countless contracts and wayleaves being renegotiated.
Ofcom's preferred model was to transfer all Wayleaves to Openreach, but it was decide that it was too complicated and cause too many issues. If you want to understand the reasons, check out the links below.

"As noted above, an Agency and Services Agreement (ASA) between BT plc and Openreach Limited, will provide the internal contractual mechanism for implementation of the Commitments related to assets. The ASA sets the contractual terms on which Openreach Limited has access to, and control of, relevant assets, and the nature of its trading relationship with its customers. BT plc and Openreach Limited will enter into the ASA once the Commitments formally come into effect. "

https://www.ofcom.org.uk/__data/assets/pdf_file/0020/104474/delivering-independent-openreach.pdf

So BT own the assets, but Openreach "has access to, and control of, relevant assets", under "an Agency and Services Agreement (ASA)"

"While ultimate ownership of all assets would remain with BT plc, Openreach
Limited will be empowered to control the underlying network used to provide
Openreach products and services on behalf of BT, including investing in and
maintaining that network in support of its overall strategy."

https://www.ofcom.org.uk/__data/assets/pdf_file/0035/98855/Openreach-consultation-2017.pdf

"The Openreach of the Ofcom Preferred Model would have: (a) high, recurring pension costs crowding out cash for investment; (b) high operating costs due to the requirement that it control its assets and people and arising from dis-synergies; (c) employees dissatisfied with being TUPE'd unwillingly into Openreach and frustrated with the loss, even if temporary, of the Crown Guarantee; (d) years of distraction, cost and uncertainty implementing the Ofcom Preferred Proposal; (e) years of uncertainty over its rights to use its assets compliantly with third party IP rights or even to rely on wayleaves to cross or enter premises; (f) a longer payback period for significant investments; and (g) a parent company more cautious about injecting cash into Openreach"

https://www.ofcom.org.uk/__data/assets/pdf_file/0029/93647/BT.pdf

"But you get my point?"

I do

"he could then offer an alternative supplier of electricity, by installing 240v cables to customers premises for charging points via the existing telecoms duct network."

I don't understand your reasoning there. Home owners could charge their vehicles from their domestic supply; And if they're really green, have Solar Panels fitted to their roof's to supplement their domestic supply, and saving more cash by charging their vehicles while the sun is shining.

"Thinking outside the box, 5G, Ai and EV vehicles are the future, the company requires someone with huge amount of cash and wisdom to change things, Elon Musk could be the man."

There's absolutely no chance in Elon Musk investing in something as mundane as Telecoms, unless it involves Satellites, imo. Look at his Business enterprises, Space X, Tesla, Gigafactories, Starlink. I couldn't imagine he'd be interested in something that wasn't somehow cutting edge, or revolutionary.

The article didn't state anything incorrectly, but the deficit is fluid and the £8 Billion deficit figure is currently out of date. I've likened Openreach to the National Grid in some of my historic posts, it's nice to see the comparison made in the media. The article didn't touch on the debt, as the author probable doesn't see BT's debt as an issue, which is also my opinion.
It'd be nice to see an article that covers everything, with mention of the facts around BT's future projected annual cost savings, and the fact that a third of BT's Net Debt is Lease Liabilities that, I think, will reduce over time as Exchanges are handed back to Telereal.

"Makes a big deal of there being a £60B cloud hanging over BT which turns out to be 'only' a small fluffy cloud of £8B."

Actually £4.3bn at 30 September 2021, net of deferred tax.

"The gross IAS 19 deficit has increased from £5.1bn at 31 March 2021 to £5.3bn at 30 September 2021. This mainly reflects a 29bps fall in the real discount rate, partially offset by positive asset returns and deficit contributions over the period. Net of deferred tax, the deficit has increased from £4.2bn at 31 March 2021 to £4.3bn at 30 September 2021."

https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/quarterly-results/2021-22/q2/q2-21-release.pdf

"Thursday’s deal shines more light on the value-hunting thinking of KKR and others like Patrick Drahi, the Franco-Israeli tycoon who this week upped his stake in Britain’s BT (BT.L) to 18%"

"BT potentially faces a similar mismatch. If valued on the same EBITDA multiple as FiberCop, Openreach would be worth 26 billion pounds, equivalent to more than three-quarters of the UK company’s overall enterprise value. Apply a Spanish-style valuation to its broadband backbone, and the value of BT’s parts exceeds the current total.
One explanation is that public investors, which rely on regular dividend payments, are nervous about telecoms operators’ massive capex requirements. The prospect of government intervention may also be weighing on valuations. But when an investor like KKR sends such a strong message, markets should be paying more attention."

https://www.reuters.com/breakingviews/kkr-sends-strong-buy-signal-european-telecom-2021-12-17/

Today was the last day of Trading for RYA on the London Stock Exchange. The cancellation of trading comes into effect at 08:00 on Monday Morning.

"It'll no doubt hurt the debt pile but also will reduce the pension deficit however at this point 0.25% isn't going to derail most investors as everyone knows it'll happen soon or later."

You're correct in saying the Pension Deficit is affected by Central Bank rate changes, since the pension fund is invested in Index Linked Bonds/Gilts, but BT's debt wont be affected, since borrowing is Corporate bonds with interest rates fixed at issuance.

At 31 March . . . . . . . . . . . . . . . . . . . . . 2021 2020 (£m)
0.5% €575m bond due June 2022a 491 509
1.125% €1,100m bond due March 2023a 936 972
0.875% €500m bond due September 2023a 426 442
4.5% US$675m bond due December 2023a 496 551
1% €575m bond due June 2024a 493 512
1% €1,100m bond due November 2024a 935 970
3.50% £250m index linked bond due April 2025 449 445
0.5% €650m bond due September 2025a 553 574
1.75% €1,300m bond due March 2026a 1,106 1,149
1.5% €1,150m bond due June 2027a 984 1,020
2.125% €500m bond due September 2028a 428 445
5.125% US$700m bond due December 2028a 512 570
5.75% £600m bond due December 2028 690 700
1.125% €750m bond due September 2029a 635 658
3.25% US$1,000m bond due November 2029a 726 807
9.625% US$2,670m bond due December 2030a 1,981 2,203
3.125% £500m bond due November 2031 503 502
3.64% £330m bond due June 2033 339 339
1.613% £330m index linked bond due June 2033 347 343
6.375% £500m bond due June 2037a 522 522
3.883% £330m bond due June 2039 340 340
1.739% £330m index linked bond due June 2039 348 343
3.924% £340m bond due June 2042 350 350
1.774% £340m index linked bond due June 2042 358 354
3.625% £250m bond due November 2047 250 250
4.25% US$500m bond due November 2049a 366 407
1.874% €500m bond due August 2080c 429 441
Total listed bonds 15,993 18,044

https://www.bt.com/bt-plc/assets/documents/investors/financial-reporting-and-news/annual-reports/2021/bt-annual-report.pdf

Anyone looked at the spike up to 169.55p? Seems to be dropping off a bit now.