BT shares up in wake of report
AS SHARES of BT buzzed 10p higher to 478.3p, its army of more than 1m small shareholders awaited industry regulator Ofcom’s response to a ‘Broadbad’ report, by the new British Infrastructure Group of 121 crossparty MPs, which recommended that its Openreach unit be demerged.
It owns the ‘last mile’ of the fibre and copper wires that run to people’s homes and businesses. Ofcom chief Sharon White has warned that ‘something dramatic’ is about to occur, but the regulator continues to drag its feet. A decision is now expected sometime in February.
To improve competition, BT’s infrastructure division was spun off into subsidiary Openreach, with its own boss and a charter from Ofcom to provide an equal level of service to every customer in the country.
BT’s rivals – Sky, Vodafone and TalkTalk – have claimed that Openreach could be doing a lot better. They argue that demerging Openreach, would make the company be more inclined to act fairly and competitively. BT claims that would slow down the pace of investment in superfast broadband, which would damage the UK’s economy as a whole.
Analyst Garry White at broker Charles Stanley says losing Openreach would be a major blow to BT’s finances, given that it provided £5bn of £17.8bn revenue last year, £2.6bn out of £6.3bn in underlying profit, and more than half of its £2.8bn free cash flow.
Yet splitting BT and Openreach is not the only option Ofcom is considering. White says other possibilities include allowing rivals to build their own networks, strengthening the existing model of ‘functional separation’ or making no changes whatsoever. But a split is likely to be expensive to engineer, so could have a negative on the share price.
TalkTalk Telecom jumped 12.9p more to 215.9p for a two-day leap of 25.9p after signing a new distribution deal with Dixons Carphone, 14.5p dearer at 471p.
Professional punters are still of the opinion that TalkTalk’s day’s of independence could be numbered. Vodafone, a possible buyer, added 4.55p at 223.2p.
Satellite TV giant Sky rose 16p to 1062p despite a sell recommendation ahead of tomorrow’s results. Broker Haitong Research believes Sky’s future in UK communications will be much more challenging than in the past. It also sees material risk that the cost to Sky of German football Bundesliga rights, up for auction by early summer, will rise by more than the 40pc consensus currently estimates, and this will undermine 20pc earnings per share growth most forecast for 2018.
The Footsie retrieved a 40-point deficit to finish 78.91 points better at 5990.37, while the FTSE 250 closed 101.96 up at 16,280.98.
Buyers nibbled at the lower levels after the oil price rallied above $31 a barrel and commodity prices perked up.
Yet many fund managers just sat on their hands awaiting news from the US Federal Reserve’s first meeting since December when it made its defining decision to raise interest rates, which was considered to be a decisive move at the time but has since attracted extreme criticism.
The Fed was expected to leave rates on hold because of China’s flagging economy and the oil price crisis, but economists will be examining the Fed’s statement for signs of any shift in tone.
Wall Street closed 222.77 points down at 15,944.46 on acute disappointment with Apple and Boeing’s results, but recovered strongly ahead of the Fed’s decision.
Accountancy software group Sage showed the rest of the Footsie constituents a clean pair of heels, rising 42.5p to 610p following a better-than- expected first- quarter trading update. Organic revenue rose by 6.6pc with the performance led by Europe.
Broker Investec says there is a lot of juice left to squeeze out of this orange, and the right management team in charge to do it. Shareholders of online restaurant delivery group Just Eat suffered from a severe bout of indigestion after the shares were sold down to 374.4p before closing an uncomfortable 41.1p or 10pc lower at 379.4p.
Morgan Stanley put a big fork into early proceedings by downgrading to underweight from equal-weight, citing a loss of market share in the UK.
Apparently, rival food delivery firm Deliveroo, launched in 2013, is making serious inroads into its business.
Evraz, the Russian steelmaker, in which Chelsea FC owner Roman Abramovich owns 31pc, fell 4.25p to 60.65p after Credit Suisse slashed its target price to 30p from 80p.
Low-cost airline Wizz Air drifted 11p lower to 1850p despite lifting its underlying fullyear profit guidance after passenger numbers increased by more than 23pc in the third quarter. The company added another 19 routes to its network in the quarter as well as expanding its fleet to 65 aircraft. ÷ AIM-listed creator and publisher of mobile real-money and social games Gaming Realms touched 22p before closing rock steady at 20.5p. It has signed three licensing agreements, which will see its successful game format Slingo extend into new markets. Total group revenue for 2015 climbed 116pc to £21.4m, which was in line with management expectations. Gaming revenue was up 305pc to £10.8m.