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BT crashes to 8-year lows following another troubling update. Here’s what I’d do

It’s been a sobering time for BT Group (LSE: BT-A) shareholders in 2019.  The share price is down by more than a fifth since the start of the year, and fresh results released today lead me to expect it to keep on slipping.

Horror show

BT’s financials for the three months to June came in according to estimates. That’s about as good as it got. Revenues across the business dropped another 1% to £5.63bn, with sales dropping across all three core divisions of Consumer, Enterprise and Global. Only a fractional uptick in Openreach’s turnover stopped the business printing an unwanted ‘full house’ on the sales front.

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Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) dropped 1% to £1.96bn, and net debt soared to £17.8bn from £11.23bn a year earlier. Capital expenditure swelled 11% to £931m.

In his commentary for the period, new chief executive Philip Jansen lauded the launch of BT’s 5G rollout programme, progress on its office closure and relocation programme, and another increase in its net promoter score (which judges customer willingness to recommend its products).

Some pretty benign things to get excited about, I’m sure you agree, but also items which perfectly illustrate just how little there is to celebrate at BT right now.

Sales strains continue

Indeed, I find myself far more interested in Jansen’s comments later in the release, when he vowed to “continue to take decisive action… to further strengthen our customer propositions and market position” and to “respond to any short-term market pressures and to capitalise on longer-term opportunities.” Thus the possibility of further earnings-bashing price cuts have been touted.

BT finds itself in an increasingly bloody dogfight to stop losing share to its industry rivals. There’s more consumer choice than ever before and prices are being slashed left, right and centre. Virgin Media refreshed prices across its packages last month and in a bid to go one better, Sky has reduced the cost of its sports channels again and offered new sign-ups expensive freebies like tablet PCs.

Clearly BT has one heck of a battle on its hands to just stand still, though the troubles at its Consumer division aren’t the only thing for it to worry about. Far from it. Revenues at its Enterprise division fell at an even faster rate in the first quarter, and it’s difficult to see performance recovering here any time soon given fierce competition, allied with the broader impact of a cooling economy on British business.

Time to sell up?

It’s not a shock to see the firm’s shares falling further in Friday business, down another 4% to levels not seen since autumn 2011. And I for one expect it to keep sinking given those revenues troubles, not to mention the huge financial pressure that its fibre-laying programme is creating (in other worrying news Jansen today pledged to help the government “accelerate the pace of rollout,”plans that’ll heap more strain on its battered balance sheet).

City analysts expect BT’s earnings to fall again in the year to March 2020, this time by 7%,  and I see no reason to expect them to stop falling beyond this time. If I owned shares in the troubled telecoms giant, I’d sell them without delay.

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Royston Wild 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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