Questor says: SELL
For years BT has been a stalwart of the income investors’ portfolio. Its market value has doubled over the past five years on the back of a radical shift in the way we communicate information and watch TV programmes. There will always be demand for the services it provides.
But Questor thinks it is time to hang up on this steady dividend-payer in favour of a smaller rival. The FTSE 100 telecoms giant faces undercutting from upstart rivals including TalkTalk. A persistent battle with the regulator over its broadband network and a bulging pensions deficit makes BT’s shares look risky over the long term.
Last week, BT reported its sales had surged 35pc to £6 billion in the three months to September 30, as pre-tax profits increased 5pc to £671 million.
The boost came almost entirely from its move to gobble up the mobile network EE, Britain’s biggest mobile operator, last January for £12.5bn, giving it access to 31m mobile customers, . Without the EE effect, sales went up just 1.1pc between June and September.
The story is similar across the telecoms industry. Providers are struggling after years of intense competition. Ofcom figures show mobile data is now a third cheaper than five years ago while mobile voice calls are also falling in price.