BT Group (LON:BT)’s share price is a touch higher today as the company confirmed its performance in the third quarter was in line with managements’ expectations.
It is on track to deliver its full year outlook. In the first nine months, revenue slipped by 7% to £16.05 billion and adjusted EBITDA dropped by 5% to £5.6 billion – the impact of Covid-19 was cited for the declines. Looking ahead to the annual figures, the lower end of the cash flow predictions has been lifted to £1.3 billion, so the guidance is now £1.3-£1.5 billion. In the interim update, BT lifted its full year EBITDA guidance from £7.2-£7.5 billion to £7.3-£7.5 billion, which was left unchanged today. BT projects earnings in 2022/23 to be at least £7.9 billion.
The Openreach fibre to the premises (FTTP) network has now reached 4.1 million premises, it is on track to hit 4.5 million by March. All of Openreach’s major communications providers are now selling FTTP and sales in the third quarter were strong, sales hit a record of 17,000 FTTP per week. 5G technology is in 125 locations and the customer base stands at 2.1 million.
The group announced the sale of two of its business units in Italy to Telecom Italia (MI:TLIT) in December. The divisions generated €90 million in revenue in the past financial year, which accounted for 20% of the total revenue derived in the country. The Italian subsidiary is engulfed in an accounting scandal whereby revenues were alleged to have been inflated, the group was fined £530 million. BT isn’t out of the woods yet as the company could face penalties if the employees are found guilty for the alleged false accounting committed.
BT is tasked with supplying superfast fibre broadband to every house in the UK by 2025, but according to the Social Market Foundation, that target is unlikely to be achieved. The think tank has concerns that pricing issues and the ability to connect remote parts of the country will hold it back from reaching its target.
Last month BT lost out to Vodafone (LON:VOD) as it was vying for Virgin Media’s 5G contract. Tough competition is squeezing margins and has put BT in a bind. Additional competition is on the horizon as Telefonica (MC:TEF)’s 02 and Liberty Global (NASDAQ:LBTYA)’s Virgin Media are on track to merge, subject to regulatory approval. BT is the largest broadband provider and is a major player in the mobile industry, but O2-Virgin Media would knock them off the top spot in terms of the customer base.
In the past month, Credit Suisse (SIX:CSGN), Bank of America (NYSE:BAC), Berenberg and Jefferies lifted their price targets for BT, while UBS trimmed its price target.
BT Group’s share price was hammered in February and March last year as the pandemic took hold. It enjoyed a rebound from mid-May into early June but only to turn lower again. In September, the stock fell to its lowest level but subsequently recovered and it has been in an uptrend in recent months. While it holds above 120p, the 100-day moving average, the broader uptrend should continue. A re-taking of the January high should put the 160p area on the radar. A move below 120p could see it target 100p.
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