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Will Q1 results keep the BT share price dialling higher?

BT share price: BT van

There’s been a revival in the BT Group [BT/A] share price so far in 2021, despite revenue and profit struggling during the Covid-19 pandemic. New services, the growth of 5G and pivotal investments to improve broadband rollout have kept its business resilient and the BT share price upbeat. 

The telecoms group is set to release a first-quarter trading update at 7am on 29 July. Will the latest numbers dial up further growth for the BT share price?

BT share price recovers from coronavirus pandemic shock

The BT share price stood at 192.2p at the close on 10 January 2020, but it had slumped 48.7% to 98.58p at the close on 31 July last year. The pandemic reduced demand for BT Sport in homes and pubs, the decline in roaming hit mobile revenues, and there were fewer small and medium-sized business call volumes.

Covid-19 continued to batter revenues, but BT’s range of services and products helped it cope. More people working and entertaining themselves at home helped BT reach 1 million 5G customers, which was reflected in its half-year results. There was also a hike in its consumer Fibre-to-the-Premises (FTTP) base – connections carried out by subsidiary Openreach – from 86,000 to 598,000 in the second quarter.

As a result, the BT share price recovered to hit 143p at the close on 8 January 2021. The BT share price accelerated again, sitting at 183.75p at the close on 26 July, helped by the continued Covid-19 recovery and encouraging full-year numbers. The company revealed that mobile data usage had grown 42% over the last 12 months, with FTTP connections up 73% to more than 950,000. It was also offering businesses new options to cope with more hybrid working, such as access to Cisco [CSCO] Webex services. The BT share price was also lifted by some key strategic moves.

BT finds the keys to unlock investment

BT’s investment plans include accelerating its FTTP rollout from 20 million UK homes and businesses to 25 million by 2026, boosted by regulator Ofcom’s Wholesale Fixed Telecoms Markets review, which gave BT more certainty over returns and pricing.

It also recently sealed a deal with satellite technology operator OneWeb to develop solutions to help boost broadband in remote rural areas. In addition, BT bought 80MHz of 5G spectrum in the Ofcom auction for £452m, compared with New Street Research estimates of close to £700m.

Another pivotal move came in June when French telecom firm Altice paid £2.2bn for a 12% stake in BT, becoming its biggest shareholder. This will help BT’s investment plans and brings on board significant broadband expertise.

Funding its fibre rollout is a key challenge for the group, alongside tackling its huge pension debt mountain of £7.98bn and overall net debt of £17.8bn.

Its renewed £4.8bn Premier League TV deal, along with Sky [ASX:SKT] and Amazon [AMZN], is clearly another significant outlay. As such the telecom giant is looking to reduce content rights acquisition costs, including through a potential sale of BT Sport to another broadcaster such as Amazon.

BT’s first quarter expectations

Further commentary on its broadband and 5G rollouts, future of BT Sport and its pension deficit could feature in the first-quarter trading update impacting the BT share price. 

Investors will gauge whether the firm’s finances are getting back on track as the Covid-19 vaccination rollout helps society reopen. 

UBS analysts expect BT to post EBITDA of £1.8bn for the quarter and revenues of £5.15bn, according to Proactive Investors. This will mark a similar performance to the first quarter in 2020, when revenues came in at £5.2bn, and potentially give a further lift to the share price.

The company may also benefit from a post-coronavirus market bounce, especially its enterprise business, which could get a boost from companies looking to cloud services, data management and security options.

Analysts Jefferies see the appeal of BT’s long-term plans, forecasting annual revenues down just 0.1% in 2022 with EBITDA up 1.6% and revenues up 1.5% and EBITDA up 3.9% in 2023.

“Openreach focusing FTTP deployment on areas of existing cable coverage creates an opportunity for BT Consumer to regain broadband market share,” Jefferies stated in a note. 

Telecoms is a competitive arena with giants such as Vodafone and Sky also eager to hoover up an expected increase in consumer and enterprise spending post-pandemic. But there may be upside potential for the BT share price, backed by significant investment in the months to come. 

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