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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  BT Group plc    BT.A   GB0030913577

BT GROUP PLC

(BT.A)
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Investments pay off for European telecom's old guard

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02/22/2018 | 09:55am EST
FILE PHOTO:Hoettges, CEO of Germany's Deutsche Telekom AG, attends the company's annual shareholder meeting in Cologne

BONN/MADRID (Reuters) - Europe's former telecoms monopolies were able to show growth in their home markets this week after years under attack from challengers who have beaten down prices and eroded profits.

Deutsche Telekom, Spain's Telefonica and French Orange said investments in better networks were finally paying off, as they were able to switch customers to faster, bigger bundles of broadband and mobile connections and media at a higher price.

The established operators had found it increasingly difficult to defend their natural advantage as owners of the biggest networks as they became obliged to allow new entrants to piggy-back on their infrastructure on strictly regulated terms.

But the so-called incumbents have regained some ground as consumers focus on network quality and as they exploit their buying power with equipment suppliers and media companies.

"Nothing happens in Germany without us," commented Deutsche Telekom Chief Executive Tim Hoettges on Thursday, pointing to the company's record 5.4 billion-euro (4.78 billion pounds)spending on German broadband last year.

"We are investing significantly more in these areas than our competitors," he added.

REVENUE REVIVES

Deutsche Telekom's German revenue grew 0.7 percent in 2017, with adjusted core profit rising 2.8 percent. Telefonica posted stable revenue in Spain in the fourth quarter, with service revenue rising 0.7 percent.

Deutsche Bank said Telefonica's domestic result was encouraging despite a slide in core profit, and kept its "buy" rating on the stock.

"We believe the improved revenue trend and decent KPIs (key performance indicators) are more important as an indicator that Telefonica is managing the low-end risks in the Spanish market," wrote analyst Keval Khiroya.

Orange on Wednesday reported a return to annual sales growth in its home country for the first time since 2009.

Orange has been fighting a price war waged by younger rival Iliad in its home market, while Telefonica has contended with low-cost rivals including Mas Movil.

In Germany, challenger E-Plus was bought by Telefonica Deutschland in 2014, reducing the number of mobile operators to three from four and easing pressure to cut prices, although cable firms are still competitive on broadband.

That merger was hailed at the time as sending a signal for other European markets, but attempts at similar consolidation in France have failed, while Spain also still has four mobile carriers even after a wave of takeovers.

FIBRE DIET

An ability to offer superfast fibre connections is proving key to winning and retaining customers, and will be essential to building the next generation of faster mobile services, 5G.

Here, the carriers' approaches diverge, with Deutsche Telekom, like BT in Britain, favouring a method called vectoring that cranks up the old copper network to higher speeds without the costly extension of fibre all the way to buildings.

Spain and France offer far more fibre-to-the-building or home connections, with penetration of 34 and 15 percent respectively as of last September, while in Germany the figure was under 3 percent.

Fibre connections are offered by a host of smaller players as well as the incumbents.

With the advent of 5G, the balance of power may change again, as fibre to the building could become less important. Commercial 5G services are expected to start to become available around 2020.

(Writing by Georgina Prodhan; Editing by Keith Weir)

By Douglas Busvine and Andrés González

Stocks mentioned in the article
ChangeLast1st jan.
BT GROUP PLC 6.54% 201.7 Delayed Quote.-15.31%
CHALLENGER LIMITED 1.74% 8.2 End-of-day quote.-15.07%
DEUTSCHE TELEKOM AG -0.11% 14.762 Delayed Quote.-0.39%
HUDSON'S BAY COMPANY 2.66% 8.88 Delayed Quote.18.66%
ILIAD 0.00% 114.5 Real-time Quote.-6.64%
LME COPPER CASH 0.23% 6097 End-of-day quote.4.42%
ORANGE -0.78% 13.275 Real-time Quote.-6.22%
TELEFONICA 0.49% 6.726 End-of-day quote.-8.35%
TELEFONICA DEUTSCHLAND HOLDING -0.63% 2.662 Delayed Quote.-22.12%
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Financials (GBP)
Sales 2020 22 990 M
EBIT 2020 3 739 M
Net income 2020 2 111 M
Debt 2020 18 829 M
Yield 2020 7,64%
P/E ratio 2020 9,51x
P/E ratio 2021 9,48x
EV / Sales2020 1,68x
EV / Sales2021 1,71x
Capitalization 19 785 M
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Mean consensus OUTPERFORM
Number of Analysts 20
Average target price 236,04  GBp
Last Close Price 201,65  GBp
Spread / Highest target 73,6%
Spread / Average Target 17,1%
Spread / Lowest Target -29,7%
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Managers
NameTitle
Philip Eric Rene Jansen Chief Executive Officer & Executive Director
Jan Petrus du Plessis Chairman
Simon Jonathan Lowth Chief Financial Officer & Executive Officer
Howard Watson Chief Technology & Information Officer
Nicholas Charles Rose Senior Independent Non-Executive Director
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