ALEX BRUMMER: BT should be buzzing but shares are in the doldrums

You might think that BT would be a big winner from lockdown. 

As the nation’s dominant broadband operator, owner of the EE mobile network with strong sports video content, it should be among the handful of FTSE 100 stocks having a good pandemic, if such a thing is possible.

Instead, the shares are languishing at around 100p. putting a value of £10.4billion on the enterprise.

BT shares are down at around one pound putting a value of £10.4bn on the enterprise, less than the £12.5bn former chief exec Gavin Patterson shelled out for mobile provider EE in 2016

BT shares are down at around one pound putting a value of £10.4bn on the enterprise, less than the £12.5bn former chief exec Gavin Patterson shelled out for mobile provider EE in 2016

BT shares are down at around one pound putting a value of £10.4bn on the enterprise, less than the £12.5bn former chief exec Gavin Patterson shelled out for mobile provider EE in 2016

In context, that is less than the £12.5billion former chief executive Gavin Patterson shelled out for mobile provider EE in 2016.

The arrival of Worldpay pioneer and former private equity whizz Philip Jansen in January 2019 signalled the start of a new era. He promised more fibre-to-the premises broadband and pledged a £12billion investment to fit the UK with ultra-fast broadband by 2025.

But, like his predecessors, Jansen is finding delivery to be hard going. It was quite encouraging recently when reports emerged of private equity possibly becoming a partner in network arm Openreach, which would enable delivery to be properly financed and speeded up.

A precedent for this was set in August when KKR bought into Telecom Italia’s broadband network. 

Jansen is gung-ho for change and a financial restructuring to release value for BT’s small investors (including this writer). He is keen to provide the upgraded service for workers fed up with the flimsy quality in their homes.

He is thought to be encountering some resistance from Jan du Plessis, the chairman who hired him. Neither is he getting the full support he would like from his executive team including finance director Simon Lowth, who was in place when he arrived.

There is nothing new about BT foot-dragging. Two decades ago, when Netflix was still posting out videos and CDs, UK start-up Video Networks, a Stevenage company that had done deals with Hollywood to deliver up to 5,000 movies, developed technology which could use BT copper wires and offered the telecoms firm a 50 per cent stake.

After initially providing encouragement, BT backed out of the deal. Using similar technology, Netflix has grown into a movie and production giant worth £168bn and become a must-have in lockdown. BT is beset with indecision.

There are a range of ideas for giving BT a new lease of life. It could bring private equity into Openreach and/or sell global networks. 

Another possibility is restructuring EE to better compete with the merger between Telefonica-controlled O2 and Liberty-controlled Virgin Media.

Galvanising a recalcitrant board and cutting through a complacent culture becomes more necessary every day.

Pandemic surfers

So who are Britain’s Covid-19 stock market beneficiaries?

Among the bigger beasts, cancer drug innovator Astrazeneca is a winner and has been rewarded by investors for pursuing the Oxford Jenner Institute vaccine with a real sense of urgency.

Other, smaller pharma firms such as University of Southampton spin-out Synairgen have enjoyed spectacular rises on the back of promising treatments. Online shopping has come into its own. 

Ocado, has had a spectacular rise, and is now worth £21billion –more than all the other grocers added together – and a fraction less than market leader Tesco at £22billion.

Digital fashion firm Asos has almost doubled in value since the start of the year and is worth £5.3billion. Boohoo is worth £4billion.

A more surprising return to form is the unfashionable B&Q and Screwfix owner Kingfisher. 

Less-known risers are the Cambridge video-game developer Frontier and fantasy war games retailer Games Workshop. Even eternal struggler model train maker Hornby is enjoying a virus halo.

Fancy that!

Scotland the brave

The century-old Edinburgh fund manager Baillie Gifford has put the zip back into the reputation of Scottish finance with its cornerstone investments in Silicon Valley.

Now it has obtained a private fund management licence in China and has registered a Shanghai asset management arm to attract local institutions and billionaires.

It will also give it clearer sight of Chinese tech and start-ups in which it has £39billion invested, and has played a key role in the upward journey of the Scottish Mortgage Investment Trust.

Best that Donald Trump doesn’t know.

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