BT Group - WIFI debacles, scandals and u-turns: got to be time to buy!

By Chris Bailey of Financial Orbit | Tuesday 30 May 2017

Disclosure: I own shares in one or more of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

As the part of rural Wales I was staying in during a good chunk of the Bank Holiday weekend apparently is intermittently covered by the leading mobile network recently purchased by BT Group (BT.A), I had to return to England to surprisingly wax lyrical about the telecoms giant, as the dearth of WIFI forced me to buy an antiquated media device called a newspaper. Within its grubby pages I read that shock-style headline that 'BT threatens fatal blow to final salary pensions'.

Yes, the deficit has got so large at the telecoms behemoth that, like the rest of the private sector world (which it joined in that wonderful mid-80s epoch), it is apparently seriously considering joining the defined contribution world where what you put in matters more than the comedy last salary an employee was last employed at.

At one level it is testimony to BT's strong cash flow generation capabilities as the leading broadband provider to the UK populace that it has managed to spin it out this long, whilst paying a dividend that is currently pushing above a 5% yield. But, given the desperate accounting scandal that has enveloped its Italian business and the slowdown in public sector contracts as well as the whole world simultaneously learning that - outside of rural Wales - a phone app or three can fulfil much of your core communications requirements for you, it is no surprise that the bloated pension liabilities are being reviewed.

Whilst the usual motley crew of interests has been rolled out to claim imminent poverty, in the real world it is sensible steps. Admittedly after the accounting scandals and public sector contract dullness, the BT management team looked at best hapless However, whisper it quietly but the strategy of mating broadband receipt direct debits with fixed line business, the football rights fee-busting BT Sport and as aforementioned a mobile phone network makes sense in a world of 'quad play' telecommunication requirements (fixed line, broadband, mobile, pay TV). Think of the administrative savings and network combination offers for starters.

As with all ex-nationalised businesses, there is also a bit of residual nous in how to deal with government as showed through with the recent legal separation, but not aggressive spinning off, of Openreach, which looks after the plumbing of the BT network.

Pulling it all together, if you throw in some easy comparisons, a 5%+ dividend yield it is covering and ongoing efficiency gains via deals recently struck, BT Group shares should be in the higher and not the lower 300s in my opinion. And in a world of mixed individual share value in today's stock markets, that's enough to make them one of my favoured FTSE-100 buys currently.

Now all it needs to do is ramp up the WIFI capabilities in various parts of rural Wales in time for my summer break...

Chris Bailey is the editor of Financial Orbit

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