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Investors need clearer guidance on the real benefit of huge fibre investment
Thursday 25 Jun 2020 Author: Steven Frazer

The Saudi-backed Public Investment Fund (PIF) is thought to be quietly building a stake in UK telecoms giant BT (BT.A), but hopes that the sovereign wealth fund is laying the foundations for an all-out takeover have been shot down.

Rumours have emerged that PIF has been buying slugs of BT stock, although the stake remains below the 3% of the company mark which would mean having to announce details to the market.

The sovereign wealth fund is also believed to have offered BT substantial new funding lines to help pay for its huge fibre to the premises (FTTP) network investment, which was apparently declined.

Broker Jefferies believes that the funding offer does illustrate a growing view that Openreach will be the only national fixed line network ‘there will ever be’, and that the ‘wall of money’ from private equity to fund rival networks is drying up.

Yet Numis, another broker, says PIF’s move is likely to have little long-term impact on the BT share price. ‘News of this investor, or any other, buying a minority stake in the telco giant is
unlikely to help its share price for more than an insignificant amount of time,’ it said. 


Numis analysts believe BT needs to back up terms like ‘value-enhancing’ and ‘value-creating’ it uses to describe the potential benefits of its big long-term spend in FTTP and to modernise itself with explicit guidance for its current five-year plan.

‘Investors appear to see extra fibre investment currently as little more than extra cost,’ said Numis’ telecoms analyst John Karidis.

BT’s share price has fallen nearly 38% since the start of 2020, but the stock’s dismal performance has been going on for years, having lost more than 75% of its value since November 2015.

‘The stock is down 54% since chairman Jan du Plessis took office in November 2017, 50% lower since he said the share price will look after itself if BT executes the right strategy (May 2018),’ said Karidis.

He remains hopeful that a clearer earnings steer will come as Openreach and major customers reach long-term agreements on fibre network pricing and volume.

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