There’s something wrong with BT Group (LSE: BT.A). As the former British Telecom, this company has a good brand, and as one of Britain’s few tech titans it should have benefited from the coronavirus crisis that has kept us all at home for months. Without BT’s infrastructure, we wouldn’t be able to Skype and Zoom, and work from home. And yet, BT shares have fallen for a full five years.
What’s wrong with BT shares?
Historically, BT has suffered from the same problems as other privatised or semi-privatised former state-run utilities such as Royal Mail: legacy technology, universal service obligations, and an onerous pension scheme. I don’t want to talk about those things today.
I want to talk about what I think is wrong with the fixed broadband business. With most if not all people – even my elderly dad – having a mobile phone these days, the only reason anyone still has a BT line is for supposedly super-fast broadband. Since my dad doesn’t do broadband internet (or any internet at all) he doesn’t use BT any more. Nor does my father-in-law. Nor do I.
For at least five years, I’ve been operating with only a mobile phone that provides me with a 4G internet connection at least as fast as (and probably more reliable than) I could get with BT broadband. I can tether my laptop and TV to stream movies, and the necessary “unlimited mobile data” plan costs me no more than the equivalent BT broadband. Best of all, I can take it with me wherever I go.
Despite what the government says about needing to get super-fast fixed-line broadband out to everyone in the UK, I think that fixed lines will become totally redundant when 5G really gets going.
Can 5G save BT?
These days, BT isn’t only a fixed-line telephone and broadband provider. Having divested itself of its original mobile brand Cellnet in 2002, which became O2 and was sold to Telefonica in 2006, BT subsequently bought rival mobile operator EE in 2016.
This was a good move, in my opinion, because EE was the first and is maybe the best provider of super-fast 5G services in the UK. If anything can save BT, 5G can, but this is not yet reflected in a rising share price; maybe because of the likelihood that 5G services will cannibalise BT’s fixed broadband customers who (like me) will ultimately be happy to be mobile-only.
Should I buy BT shares now?
Actually, I already have bought some BT shares, but only as a test purchase to see which way the price goes. I often do this with stocks I have my eye on, with a view to scaling in (buying more) by averaging down if the price goes down or pyramiding up if the price goes up.
If you think I’m mad to look at buying more either way, I can tell you that I’ll only average down (with a little more money) if I can do so at a much lower price point, and I’ll only pyramid up when I have sufficient profit in my original position to offset the risk of the new investment.
Finally, what really interests me is that on the one-year price chart, BT shares seem to have flatlined:
