This page is quite old hence its rather spartan appearance.
Why not check out our Latest Stories page for our newest articles or search our site for anything.
MARKET COMMENT
By
If you're a BT (LSE: BT.A) shareholder then you'll have to decide shortly whether to take up the rights offered by the present £5.9b fund-raising issue. If you don't then you your stake in the embattled telecom company will be diluted. Look at this earlier comment for more practical details on the 3-for-10 issue. These new shares are priced at 300p, 47% below yesterday's 568.5p closing price and 29% lower than the 420p price at which BT sold shares in its second privatisation issue of July 1993. The diluted post-rights price, then, is 507p. But how do you decide whether to take up the rights or not? If you do, you're backing the company for the long run. In the short term things do look messy. BT needs the cash, pure and simple, to pay off some of its £28b debt mountain. In the longer run the group must sort its strategy to grow sales and profits. Today, BT also announced its final results. These seem to have been sidelined amidst all the hoopla surrounding the rights issue. However, these should not be ignored, as they show above all how BT's business is developing, or in some cases contracting. The figures don't make pretty reading. The final dividend has been scrapped, as was widely predicted. That makes logical sense since the group is trying to bring in cash via the rights issue, not give it away. Profits before tax, goodwill and exceptional items fell by a third to £2.07b despite turnover rising 9% to £20.43b. Profits fell as the interest charge rose 2.4 times to £1.31b. Nevertheless earnings before interest, tax, depreciation and amortisation (EBITDA) don't look that brilliant either, rising only 0.8% to £6.49b. Thus operating margins are falling as price competition continues to have an impact. However, these overall results disguise how individual businesses within BT are performing. To clear further debts, the group will go ahead with the fire-sale of the Yell directory business. In addition the group plans to split into separate wireless and fixed arms, demerging BT Wireless by the end of the year. Looking at the future fixed-line operations BT might sell its stake in the Concert joint venture with AT&T (NYSE: T), which makes losses. It could also separate its heavily regulated wholesale networking business from its retail fixed line business, which is performing well thanks to rising Internet usage. This is not the end, it is not even the beginning of the end, but today's announcement does signal the end of the beginning of BT's restructuring. The telecom company will not only have to borrow Churchill's words but will also have to use his management skills to turn the dinosaur around. More: BT wants your cash If you have a question for BT about the results or the rights issue, post it on the BT discussion board. We shall be speaking to the company at 2:30pm today.