Fears about pensions and Ofcom ‘will deter takeover bid for BT’5 Nov 2020 16:17
The chief executive of BT has suggested that uncertainty over regulation and its pension deficit would help protect the telecoms group from any takeover threat and that it could not just be picked up “on the cheap”.
BT’s shares have fallen to ten-year lows in recent months, weighed down by rising investment costs in new 5G and full-fibre broadband networks as well as increased competition and the suspension of its dividend.
The slump in BT’s share price to about 100p has prompted reports that Goldman Sachs has been helping to bolster its takeover defences against any approaches from industry rivals and buyout firms.
Philip Jansen, chief executive, said yesterday that he was not concerned. “All we can do is continue to work really hard, making BT better and giving it much better prospects,” he said. “The strategy is spot on.”
He said the uncertainty over the returns BT can make on its £12 billion investment expanding its new full-fibre broadband network — which will be clarified by Ofcom, the regulator, in the spring — and the triennial review of its pension fund, which is expected to show a deficit of about £9 billion, were “big hurdles for anyone looking at the company”.
The shares rallied after the update but later closed down 2½p or 2.5 per cent at 99¼p.
BT is the former state monopoly that was privatised in 1984 under Margaret Thatcher’s government. The group includes Openreach, the country’s dominant broadband infrastructure, and the mobile network EE as well as the BT Sport television channels and an enterprise division for business customers.
Mr Jansen’s comments were made as BT posted an upbeat outlook alongside its first-half results. BT raised the floor on its underlying earnings for the year to next March by £100 million to a range of between £7.3 billion and £7.5 billion. It remains down on the £7.9 billion BT generated in its last financial year, before the full impact of the pandemic, but it expects to at least match that level in 2023 and said it underpinned the reinstatement of its dividend in 2021-22, at 7.7p per share.
BT posted a drop in revenue of 8 per cent to £10.6 billion in the six months to September and adjusted earnings before interest, tax, depreciation and amortisation (ebitda) down 5 per cent at £3.7 billion, which was broadly in line with City expectations. On a statutory basis, pre-tax profit dropped by a fifth to below £1.1 billion.
Trading was weakened by the pandemic disrupting live sport and therefore revenues from pubs and clubs, and weaker demand from small business customers. Mr Jansen, 53, said he was optimistic that the worst of the impact from the pandemic was over for BT and that at “some stage things that have hurt us will be back”, such as hospitality and tourism.
BT is extending Openreach’s full-fibre network to 20 million premises by the mid-to-late 2020s.
Sign In
Follow the stocks
