When I think of fixed-line telecoms company BT Group (LSE: BT-A) (NYSE: BT.US), two factors jump out at me as the firm’s greatest strengths and top the list of what makes the company attractive as an investment proposition.
1) Brand strength
As consumers in the UK, we are bombarded with choices from companies vying to supply us with solutions for our communication and entertainment needs. In a state of shell-shock, we can’t watch TV, listen to the radio, walk down the street, surf the internet, or answer our own telephones without attracting the napalm-sales-pitch of some communications company or another trying to pummel us into submission by getting us to sign up to their talk, data transmission, broadband or viewing services.
When I find myself under such intense fire, I tend to go to ground. Faced with so many choices, and by so much pressure, I reject them all and reach for a brand I feel I can trust. Usually, that means a brand I’ve known for a long time, and in the case of communications and all things related to it, that means BT.
BT and I go back a long way together. I can remember when the firm was one arm of the GPO – I even have telecoms equipment in my house with GPO embossed on it. I can remember BT striking out on its own and its shares making my grandparents richer than they were. To me, rightly or wrongly, BT has heritage, tradition, and fine, upstanding values centred on good-old-fashioned service. As long as the price isn’t excessive, I will go for BT every time over some other young fly-by-night upstart firm.
It doesn’t matter that my recent experiences with BT haven’t lived up to an imagined rose-tinted idyll that’s taken decades to nurture. What matters is that my behaviour is probably similar to that of many others, and that’s what gives the BT-brand its strength. Whether BT can convert such customer loyalty and faith into worthwhile financial results in the long run remains to be seen.
2) Growth opportunities
In 2013 BT grew subscriptions to its fibre-optic broadband service from 0.5 million to 2 million. The provision of broadband-based consumer and business services is a big growth area for the firm and the potential still looks huge with fibre availability now running at about 17 million premises in the UK so far.
The UK is important to BT as, last year, most of the firm’s profits came from the region. However, the company has ambitions abroad and is currently operating in more than 170 countries. The firm’s Global Services division delivered about 31% of revenue last year, but the directors are eyeing much more than that in the future. One of the company’s stated aims is to become a global leader in its field, which offers investors the tantalising prospect of profit growth abroad.
The twin potential of both growth abroad and in the home market, set against a backdrop of a rapidly digitalising world makes BT attractive. The firm seems to be in the right place at the right time. We can only hope that the quality of the firm’s service levels and training programmes can keep up with rapid growth – I’m keeping tabs on that point.
What now?
City analysts following BT expect the firm’s earnings to grow by about 9% during the year ending March 2016. Meanwhile, the forward dividend yield is running at around 3.5%.
