“They are starting to look less competitive compared to someone like Sky. First of all, the group spent a lot of money acquiring EE, which brought their net debt to £10bn. Alongside that, they are starting to ratchet up their broadband pricing by charging customers for previously free things like the BT sports TV package. This may spark some reaction from customers, if they feel that BT has not delivered value for money.”
The company is not without its attractions despite this though, with one of the major pros being its steady dividend, according to Edentree fund manager Ketan Patel.
“BT is one of the most widely held FTSE 100 stocks at a private shareholder level. And they have now said they are committed to increasing their dividend by at least 10% this year and the next, which means you are looking at a yield of 4.9% this year and 5.4% the following year. So you can see why people would want to own this legendary blue chip when it has such a lovely dividend floor.”
Though Patel thinks that BT’s latest Italian fiasco could add another unnecessary headwind to the telecoms company, he thinks BT’s pension deficit is a much greater headwind.
“BT has a variety of sectoral and macro-level things going against it. But I think the pension deficit could become the real issue for the company. The company has a market cap of £31bn but its debt, including the pension deficit, is close to £20bn. BT are a premier provider but shareholders need to be mindful that it has a lot of potential headwinds over the next three years.”
