BT Group plc Beats Vodafone Group plc In The Telecoms Battle

Vodafone Group plc (LON: VOD) is losing its way, but BT Group plc (LON: BT.A) is resurgent.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

BTWith the successful sale of its share of Verizon Wireless to Verizon Communications back in September 2013, followed by rumours that big US telecoms firms like AT&T were chomping at the bit to launch a takeover for the rest of the company, Vodafone (LSE: VOD) (NASDAQ: VOD.US) was a darling amongst investors.

But what a difference a year can make in the fickle world of investing.

Shares falling

Vodafone’s share price peaked above 240p in January 2014, but it’s since slid back to 205p today for a modest 7% rise over 12 months.

But what about the FTSE 100’s other big telecoms player, BT Group (LSE: BT-A) (NYSE: BT.US)? Here’s how the two square up:

Year to Mar BT Group Vodafone
EPS growth 2014 +7% -13%
P/E
13.5 12.6
Dividend Yield
2.9% 5.0%
Dividend Cover
2.59x 1.59x
EPS growth 2015*
+3% -63%
P/E
13.0 31.2
Dividend Yield
3.4% 5.8%
Dividend Cover
2.31x 0.57x
EPS growth 2016* +7% +2%
P/E
12.1 30.5
Dividend Yield
3.9% 6.0%
Dividend Cover
2.17x 0.56%

* forecast

Steady profit growth

Since 2009, BT has recorded five straight years of earnings and dividend growth, and there are two more years of the same to come if forecasts are near the mark. And over that period, the share price has stormed up by 170% against 40% for the FTSE — the Vodafone price is up 55% over the same period.

BT has been recovering impressively from the recessionary days when payments to address its pension fund deficit were proving a serious drain on cash, and with asset values having risen some way from the depths of 2009, those dark days look to be well behind us now — and the company recently announced reinsurance measures to help deal with uncertainty due to rising life expectancy.

And when it came to first-quarter results this year, BT reported a 7% rise in adjusted pre-tax profit with a 10% rise in adjusted earnings per share. Net debt was also down, by almost £1bn to £7bn.

Falling revenues

In contrast to that picture of health, Vodafone has been suffering from falling service revenues for the past year or so, with a 4.2% drop reported at Q1 time this year following on from a 4.3% slide at for the full year ended March.

There are gains in developing countries where basic services are on the rise, but Europe saw a 7.9% fall in the latest quarter.

Vodafone is in a transition phase of investing in 4G networks, but doesn’t expect to achieve complete coverage of its five main European markets until 2017.

On top of that, Vodafone has downgraded its dividend policy to only try to match the previous payment each year, although even that would be far from covered by forecast earnings for the next two years.

Only one winner

Best long-term investment? It’s looking like an easy win for BT.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »