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WHAT IS HAPPENING?
Mexican billionaire Carlos Slim this week acquired a 3.2 percent stake in BT through his family business.
Slim, 84, made his fortune through América Móvil, the largest mobile phone group in Latin America. His blow came as BT boss Allison Kirkby, who took over at the telecoms giant in February, presses ahead with a major turnaround plan.
WHAT ARE BT’S PLANS?
Presenting full-year results last month, Kirkby said BT would aim to save another £3bn a year by the end of 2029 through upgrading and closing legacy networks. He said the FTSE 100 group was exploring “options for our entire international presence”, which could include partnerships and selling parts of the business. But BT said the UK was its main target.
Despite the cost-cutting plan, Kirkby said there was “no change” to its proposals to cut almost half of the 130,000 workers by the end of the decade, including about 10,000 who will be replaced by AI.
And in a bid to woo investors, BT increased its dividend for the year by 4 per cent, to 8 pence per share.
WHAT DO ACTIONS DO?
BT shares have enjoyed a recent rally as investors applaud Kirkby’s turnaround efforts and Slim’s investment in the group.
The stock rose 6 percent last week and is up 11.1 percent since the beginning of 2024.
But BT shares are still down from their peak in 2015, and analysts argue they are severely undervalued.
SHOULD YOU BUY STOCKS?
Many experts have suggested that now could be a good time to strike. Karen Egan, telecoms expert at Enders Analysis, said BT could be a good bet for investors looking for long-term gains.
Although he acknowledged that “it is not going to be an easy year for the sector”, he supported BT’s efforts to increase profits. But the industry has been plagued by low shareholder returns, meaning investors looking to cash in on their investment should proceed with caution.
WHY ARE TELECOM COMPANIES UNDERVALUED?
Telecommunications groups have had difficulty attracting shareholders due to high debt and large corporate structures, which are expensive to maintain.
They are also under pressure to continue upgrading their infrastructure, or risk falling behind their rivals.
This backdrop has only deteriorated in an era of high interest rates and inflation. The UK market is also undervalued compared to overseas indices, making it even more difficult for companies like BT and Vodafone to succeed.
