BT Group (LSE:BT.A) shares have doubled in value over the past 18 months. That means £10,000 invested then would be worth £20,000 today. What’s more, an investor would have received around £700 in dividends over the period.
Back then BT shares were among the hardest to value on the FTSE 100, primarily due to its huge fibre-to-the-premise (FTTP) investments and net debt. However, it continues to present an interesting investment case.
Plenty of moving parts
The latest quarterly results (Q1) tell us a story of a company actively transforming itself. And from a bullish perspective, BT’s operational momentum is clear.
The company continues to deliver on its fibre rollout targets, now covering over 19m premises, with record FTTP demand leading to a 46% rise in net adds year on year. Take-up rates have reached 37%, a market-leading figure, further validating the long-term strategic bet on network investment.
Retail fibre adoption is also climbing steadily, up 32% year on year, while the 5G subscriber base expanded to 13.5m. This also shows continued migration to next-generation connectivity.
Importantly, Openreach is a strong profit driver, with ARPU increasing by 4%. Alongside this, cost efficiencies are flowing through, with labour down 5%, lower energy consumption, and streamlined operations offsetting inflationary pressures.
And this is good to see. The stock started rallying last year after CEO Allison Kirkby set a new target to deliver £3bn of gross annualised cost savings by the end of fiscal year 2029. She noted that the business had hit inflection point of FTTP rollout.
Guidance confirmed, but debt a concern
Recent performance has allowed management to recommit to its full-year and medium-term guidance. On a statutory basis, analysts now see BT trading at 15.7 times forward earnings. This figure falls to 13.6 times for 2026 and 13.2 times for 2027. That seems reasonable for a capital-intensive operator with defensive characteristics.
Dividend stability is also appealing, with payout ratios easing into the 50%-60% range and forward yields near 4%-5%. This suggests some sustainable income-backed returns.
However, there are several reasons for investors to be wary. Headline revenues declined by 3% last quarter, pressured by weaker handset sales and softness in international operations. While record fibre take-up is encouraging, underlying broadband line losses of 169,000 highlight the ongoing competitive intensity.
Crucially, profitability has dipped, with adjusted EBITDA falling 1%, and statutory profit before tax dropping 10%, largely from rising finance costs and depreciation. Most importantly, leverage remains an issue, with net debt close to £20bn, limiting financial flexibility.
All-in-all, BT represents an intriguing proposition. Bulls will see a leaner, future-proofed infrastructure leader trading at modest multiples. Bears will argue that growth is fragile, debt-heavy, and returns muted.
Personally, I don’t see the margin of safety I’d be looking for at the current price. It’s even trading above its average share price target. I think investors may want to consider other options.
