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Can BT share price regain confidence after recent lows?

Can BT share price regain confidence after recent lows?

In May’s announcement, BT Group reported a profit of £2,353m, representing a big slide from the previous year.

The board also made the “exceptionally difficult” decision to suspend its shareholder dividend, which sent the BT share price crashing to low levels last seen over 10 years ago. This seems long overdue given the challenges facing the business, with management citing the challenges of Covid-19 as the main reason for the suspension.

The reality was that BT Group has long been fighting a losing battle. It has been facing increasingly competitive environments across all its markets, in telecoms and entertainment, and its nearest competitors have all signed deals to improve their content, as well as cash flow.

Growth in BT’s telecoms and television businesses

In recent years BT has spent a lot of money to cement its place in the quad-play market, with its acquisition of EE, which it bought for £12.5bn in 2016, creating the UKs biggest telecoms company. The company has also moved into the pay TV sector, with a strong focus on making waves in the sports market. In November, BT announced that it had secured the rights to exclusively show UEFA Champions League and Europa League games until 2024. This move has put BT in direct competition with the already well-established Sky, which has recently been bought by Disney as part of the entertainment giant’s acquisition of Fox.

Further hurdles with Huawei removal

Another hurdle for BT to overcome is the recent decision by the UK government to ask businesses to remove all Huawei equipment from its infrastructure over the next seven years. While announcing the measures, the government claimed it “could no longer guarantee the safety” of the Huawei deal, and the UK would ban purchasing of Huawei infrastructure from 31 December 2020. A 2027 target for removal of all Huawei kit represents a more generous amount of time than some MPs were pushing for, with 2023 the initial preferred date.

With a seven-year timeframe agreed, BT’s share price must overcome these potential longer-term costs, and the subsequent two-year delay to the implementation of a wider 5G rollout that has been forecast. On a more positive note, this delay will help in spreading those costs out over a longer period of time.

BT share price needs Openreach to prosper

BT’s recent crown jewel has been the Openreach division. Its broadband service has annual revenues totalling £5bn, and has the capacity to reach 31.8m homes in the UK. This outperformance will need to continue for investor confidence to return, and a genuine recovery in the BT share price to be maintained, as the company looks to move further away from the multi-year lows that it saw over recent months.  

BT announces its Q1 figures on Friday 31 July at 7am. What will the results mean for the BT share price?

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