Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Oh my goodness how dare BT ask cosseted unionised engineers to adjust to suit the best interests of the company!
You have no idea what the real world is like. Ask a black cab driver, a journo, a restauranteer or any number of people in sectors much more tougher than yours what life and work uncertainty is really like.
I hope BT crush you.
I don’t disagree with any of this but what you’ve got to remember is the analyst community is ignoring net profit in their valuations
They are only focusing on cash flow. And there’s not much of that b/c of FTTP build
Idiots like Polo tang treat investment in FTTP as an expense rather than an investment, that’s the long and short of it. So when BT ploughs billions in it doesn’t come out the other side with any returns in his model
It’s bonkers
The expensive comment was from polo tang the ubs analysts who has always been out on this stock.
Agree velo beats except for normalised cash flow which was below - but the full year fcf guidance was raised - so overall a successful quarter
I will be buying up big tomorrow. I think the risk / reward balance is the best it’s ever been now. Think back to just before the election when we had no inkling from Ofcom and the nationalisation cloud was around; price then was 1.80 ish I recall.
If you assume 10% return over 20 years on 12bn and a risk free rate of 5% then that 12bn is worth about 30bn. 10% is the lower end of what Jansen said the investment would return at the start of the year. 20 years is what that ofcom CEO suggested was the return period.
Whatever that number is today’s announcement locks in billions of £ of returns that weren’t there a day ago. Maybe locks in is too strong but they aren’t going to walk back on this, why would ofcom do that??
It is always hard buying something that is up 30% over a few weeks but I’m very excited by this opportunity.
The end game is similar for BT I believe.
Build FTTP then spin it off for a kings ransom once over the capex hump, regulatory certainty, and rocketing connections.
https://www.smh.com.au/business/companies/telstra-splits-into-three-units-under-radical-restructure-20201112-p56dvk.html
Yeah good read, he's actually put in some work.
But there's one big miss - and it's a big reason why the share price is so weak - and that's factoring in the return from the FTTP investment. Capex up by 5% yet no attempt to model what the FTTP investment will deliver. They are only counting the cost and not reflecting the benefit of the investment. And that's becuse they are waiting for OFCOM to finalise the Wholesale Fixed Telco Review.
Really encouraging to see Vodafone and Orange follow with CPI + price increases too.
Next is a really well run business. A much better run business than BT, regardless of the merits of the comparison.
You can invest in BT while also seeing its warts you know boys...
Yes the much better comparison would have been to M&S who are culturally doomed no matter who they bring aboard at the Exec level.
BT still has way too many ‘Heads of Strategic Insights’, ‘Director of Customer Journeys’ etc etc. People on 100 - 150k base. Like with the NHS and their impenetrable admin layers.
They need to cut into these folk so it doesn’t take 50 people to be consulted to make a decision.
It was a pretty fair review to be honest though I disagree with the conclusion. Sure BT has a crap culture compared to Next but at some point the valuation is compelling no matter the culture and that’s right now. They have always been anti BT
I think it’ll bounce back up when analysts’ release revised forecasts over the next fortnight. But you have been right so far and could be on the money again, maybe it stays hovering at a quid.
I was very glad to see they have started the hard work of chopping headcount. It’s a bloated business.
Look at the below for an indicator of their headcount problem...
https://telecoms.com/505943/union-talks-of-strike-action-as-redundancies-loom-at-bt/
This mightn’t help but basically the objective is to match cash flows and ‘immunise’ the investment portfolio against inflation. So in year 28 for example the cash from investments - through dividends, coupons and redemptions - match the payouts from the plan as closely as possible. This works best with government bonds because when inflation increases the value of the bonds decrease but so does the pension liability. And vice versa. It is ‘immunised’. Importantly the assumption here is that the gov bond is risk free and the shape of the yield curve stays the same.
But with the property, corporate debt, equities - there is more to it than inflation because default risk or corporate risk is also a factor. This will have risen. So although some of the corporate debt will be worth more because yields have decreased, the rise won’t be enough to offset the rise in liabilities which will have occurred similarly from lower interest rates.
This fake example may help;
Before Covid:
Liability - 100
Assets - 100
Deficit - 0
Interest rates - 10%
Risk of default - 5%
Now
Liability - 200
Assets - 195
Deficit - 5
Interest rates - 5%
Risk of default -10%
The halving of interest rates doubles the value of the assets and liabilities all else being equal...but it’s not all equal sadly cause the cash flows of those assets are now riskier given corporate profits, commercial property tanking etc etc.
Sorry if that’s not very clear.
I don’t think the pension deficit is anywhere near as important as headcount going down by 5% or churn being low or OFCOMs review fwiw
Very fair point. Someone said it here a while back, that the gov would love to regulate BT to within an inch of its life to keep fibre as cheap as possible. Agree. Trouble for the gov is that they cannot do that if they want a national fibre network. BT won’t build, no alt network will build, in the 1/3 of the country where the returns don’t stack up without the gov offering that ‘fair bet’ BT keep talking about.