The BT [BT-A.L] share price is up more than 50% compared to a year ago, with the stock closing at 195.55p on 31 January, not far off the 52-week high of 206.70p that it reached in June. Could a positive Q3 earnings announcement on Thursday give the BT share price a further boost?
Can the BT share price keep rising in 2022?
Although the BT share price is still trading at less than half of 2015 levels, it climbed about 28% in 2021 and has jumped a further 12% so far in 2022. But can the BT share price maintain this upwards momentum? The answer to that question will rest largely on the outcome of two ongoing stories that have pushed BT’s share price higher in recent months: takeover rumours and the anticipated sale of the BT Sport pay television channels.
Takeover talk, sale of BT Sport to shape BT share price
BT has been a potential takeover target for some time, partly because of a perception that its shares are undervalued. In addition, BT’s pledge to roll out full-fibre broadband to 25m homes by 2026 will see the company benefit from government incentives to deliver faster internet connections around the UK, providing a guaranteed return on its investment.
These factors attracted a £2.2bn share purchase from Altice, the telecoms group controlled by Patrick Drahi, in June to acquire a 12.1% stake in BT. In December, Altice increased its stake to 18%. Although UK rules dictate that Drahi cannot launch a full-blown takeover bid until June, he may continue to buy up more BT stock, taking gradual control of the company while sidestepping the costs associated with a formal bid. Drahi claims not to be interested in gaining control of BT in the near term, but he could demand a seat on the BT board and get more involved if he feels certain things could be done differently or more effectively.
There has also been plenty of chatter about potential private equity bids for Openreach, the infrastructure unit wholly owned by BT that maintains the equipment connecting UK homes and businesses to the broadband network. These rumours have been circulating for a while, but there would be little upside for BT in selling off a division that is likely to drive growth over the coming years.
Meanwhile, BT is reportedly close to agreeing a deal to sell its BT Sport brand to US streaming company Dazn for around £580m. There may also be interest from other parties, with Discovery said to be open to a joint venture. As talk of takeovers and sales rumble on, the BT share price is likely to remain volatile.
BT looking to continue progress on broadband rollout
BT’s results for the six months to the end of September, which were released on 4 November, demonstrated “an acceleration of pace in the transformation of BT”, according to chief executive Philip Jansen.
BT reported that it had delivered on its cost-savings programme ahead of schedule, and that Q2 EBITDA came in at £1.88bn, with revenue in line with expectations at £5.24bn. That brought total half-year revenue to £10.3bn, down 3% from the year-ago period, as its enterprise and global divisions weighed on overall operations. Openreach had rolled out full-fibre broadband to 6m premises, BT said, with expected average build costs lowered to between £250 and £350 per premises. This helped deliver profits of just over £1bn, down 5% year-on-year.
As the company prepares to release its Q3 results, the imminent sale of BT Sport and the takeover rumours are likely to be at the forefront of investors’ minds. However, given BT’s critical role in the UK’s communications infrastructure, not just on broadband delivery but also as a mobile operator (BT owns the EE mobile network), the government has said it would “not hesitate to act” to protect BT from a foreign takeover if necessary. Given these comments, it would perhaps be unwise to bet on a takeover bid being waved through any time soon.
For now, shareholders will be on the lookout for signs that BT’s evolution into a well-run fibre broadband provider is continuing to develop at pace when the company announces its Q3 results on 3 February.
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