The BT Group (LSE:BT.A) share price has torn higher over the past six months. At 138.7p per share, the FTSE 100 telecoms giant has risen an impressive 32% in value.
It’s also the best Footsie performer in start-of-week trading too, up 6.3% on Monday (12 August). BT’s soared again on news that India’s Bharti Global has plans to become its largest shareholder.
So what are the key takeaways from today’s important update? And, more importantly, should I buy BT shares for my portfolio?
New stakeholder
Under the deal, Bharti will acquire a 24.5% stake in the Footsie firm by buying the shares held by debt-laden French telecoms firm Altice.
Almost 10% of the shares will be transferred straight away, with the remainding 14.51% of BT’s share capital to be acquired following the receipt of necessary regulatory clearances.
Bharti will also apply for clearance under the UK National Security and Investment Act, it said. The Indian company added that it has no intention of launching a full takeover of BT.
Bharti said that it supports BT’s “ambitious transformation program to deliver long-term, sustainable growth,” and more specifically its plan “to transform the UK’s telecoms landscape by building fibre, rolling out 5G technology and developing market-leading services to live, work, game and learn“.
Confidence-builder
BT hasn’t had the best of times more recently. It’s struggled to grow revenues as the UK economy has basically flatlined. The firm’s also faced colossal costs as a result of its broadband build-out programme.
But hopes have been growing that BT’s over the worst of its troubles. And for Hargreaves Lansdown analyst Susannah Streeter, Monday’s news has boosted investor hopes that BT’s now a bona-fide recovery stock.
She notes: “[Bharti] clearly sees great potential in Openreach, which is responsible for maintaining and building out the new fibre networks,” adding that “it’s also likely to have been encouraged by indications that the cost of building 5G infrastructure may have peaked, and once new customers are moved over to the new networks, there is the potential for lower running costs.”
Risk vs reward
It’s clear that telecoms companies like this have significant long-term growth potential. Demand for their services is on course to steadily rise as our lives become increasingly digitalised. And BT’s expansion programme could put it in a strong position to exploit this.
However, it doesn’t mean I’m ready to buy BT shares just yet. At the moment, I think the risks of investing continue to outweigh the possible benefits.
First off, the firm’s struggling to grow revenues as the UK economy struggles. Latest financials showed turnover reverse 2% in the three months to June. And, worryingly, many expect Britain’s economy to stay weak for a long time.
The company’s task to reignite sales is being made even more difficult by the enormous levels of competition it faces.
What’s more, while some costs may have peaked, BT’s capital expenditure bills will remain high, such is the capital-intensive nature of telecoms supply. And given the company’s already-high debt levels — net debt rose £700m last year, to £19.5bn — this makes me hugely uncomfortable.
While BT’s share price is soaring, I still wouldn’t touch it with a bargepole right now.
