BT Group’s focus on connectivity may limit growth opportunities. Telecoms industry experts expect flat growth over the next 12-24 months.
The company faces significant headwinds, including a shrinking telecom market and stiff competition from new fiber providers that threaten BT’s traditional marketshare. The transition from high-margin copper products to lower-margin FTTP services also creates a revenue gap as BT accelerates its copper switch-off strategy.
Is there any good news for BT shareholders?
On the bright side, BT could benefit from short-term gains by selling copper assets and achieving cost savings through digital transformation initiatives. While the new FTTP services have slimmer margins, increased connection charges in select regions may stabilize revenues.
The B2B segment is also projected to decline in low single digits, pressured by regulatory pricing constraints at Openreach, limiting its competitiveness against urban-focused “Altnets.”
“Declining demand for legacy copper lines and heightened fiber competition further intensify these challenges,” commented Albie Amankona, an analyst with Third Bridge, and independent research house. “To adapt, BT is leveraging its Division X initiative to explore new markets, investing in 5G private networks and IoT solutions while testing smart devices under the EE brand.”
BT holds a strong position in 5G
In the UK’s 5G market, BT holds a strong position, primarily through EE, and is recognized for its leadership in deploying small cells. However, the potential merger between Three and Vodafone could disrupt the competitive landscape by consolidating spectrum and reducing Vodafone’s network expansion costs, putting BT at a disadvantage.
BT’s operational efficiency initiatives, including reducing its workforce and number of exchanges from 6,000 to under 1,000, are expected to help maintain 39-40% EBITDA margin.
What does AI tell us about BT’s numbers?
Despite big gains in the BT share price in May, it is now rated Underperform by artificial intelligence stock analytics platform Bridgewise. Indeed, Bridgewise goes on to rank the company in the bottom 30% in the communications services sector. It flags up net change in cash and return on equity as significant issues for the stock.
Based on past performance for both BT and stocks in the wider global telco universe, weaker relative performance in these particular metrics has often been associated with a lower likelihood of a company’s stock outperforming industry competitors.
Bridgewise sees no real potential upside in BT stock at the moment.
Looking at the medium term trend analysis of BT shares, we see a scenario which could challenge the narrative above. Trend Intelligence looked at BT for us and saw BT was pricing above one of its moving averages. These remain organised in a “partially positive configuration.” Looking at the first chart, the BT share price is trading above the Japanese Cloud, with the delay line above the cloud. With the most recent Japanese Average Candle showing as red, this is still a marginally positive trend of BT (see first graph below).
Both the D* and R* momentum indicators, which we can see in the second and third graphs, are also trending positive. The M* momentum indicator, which is the final graph, is neutral, because the fast red M* line is below the white signal line, but still above the zero line.
Trend Intelligence says its medium term view for BT Group is a continuation of a moderate passive trend. The summary shows price action operating above one moving average. The momentum indicators are producing mostly positive signals, but are trending downwards, which infers the possibility that we could see more negative momentum signals emerging for BT shares in the medium term.
