Is buying £2,000 of BT shares a smart investment?

BT shares are in the spotlight as rumours circulate about a potential takeover. Is now the time to invest in this business?

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Investing in BT Group (LSE:BT-A) shares is a popular choice here in the UK. The telecommunications giant can be found in many institutional and personal portfolios. And just this week, the stock has managed to grab even more investor attention on rumours of a potential acquisition.

So should I be considering an investment in this business? Let’s explore.

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Is BT ripe for acquisition?

Last month, rumours started circulating that Indian conglomerate Reliance Industrie was in early-stage talks with BT’s management team about a potential takeover. This news even managed to push the BT shares up by nearly double-digits. But, since then, another interested party may have entered the arena.

Altice, a French multinational telecommunications and media firm, has started buying shares. A lot of them. In fact, the group now holds 18% of the total voting power for the company. Patrick Drahi, Altice’s president and founder, has said he is not intending to make a bid for the company. But, in my experience, this is starting to look like the early stages of a hostile takeover.

So is BT about to be bought out? No. At least, I think it’s highly unlikely. Why? Because the British government have made their stance on the prospect very clear.

“The government is committed to levelling up the country through digital infrastructure and will not hesitate to act if required to protect our critical national telecoms infrastructure.”

In other words, even if a bid is made, I think regulators would more than likely block any deal. But, acquisition rumours aside, are BT shares still worth buying?

A bull and bear case for BT shares

Over the last five years, an investor holding BT shares is probably quite disappointed. That’s because the stock is down almost 50%. There are undoubtedly numerous factors behind this lacklustre performance. But from what I can tell, the primary catalyst was a complacent management team that allowed competitors to steal market share. 

Consequently, both revenue and earnings have slowly started falling over the years. In turn, the group became more reliant on debt financing to run and expand operations, compromising the balance sheet in the process – a problem that remains present today. That’s obviously not the trait of a winning business.

However, there is still hope for a long-term comeback. The management team admitted its neglect to shareholders and is now doing something about it. Under a new £15bn investment programme, the company is rapidly expanding its fibre optic infrastructure to cover 25 million homes by 2026.

Looking at the latest half-year report, BT seems to be on track to meet this goal. It has currently equipped six million homes with fibre. That’s 24% of its target within the first seven months – not bad. And with equally impressive progress made with its 5G network rollout, BT shares might be about to gain some significant upward momentum.

Is now the time to buy?

I must admit, my opinion of BT and its shares has improved drastically in 2021. And so far, management’s new strategy seems to be working. Yet, personally, I remain untempted to add this stock to my portfolio, even as a relatively small position, like £2,000.

It does, after all, still have a substantial debt problem. And I think there are far better and less risky investment opportunities for me elsewhere.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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