LONDON: BT Group Plc has scrapped dividends for two years after the coronavirus dashed hopes of a return to growth next year, and has set aside more cash to accelerate a national fibre network rollout. Its shares tumbled as much as 12%.
The London-based carrier said it was suspending the final dividend for the latest financial year and wouldn’t make any payout for the following year, as it announced full-year results yesterday.
Dividends will be half their previous level when they resume, it said. BT stepped up its fiber build-out target and said it was starting the next phase of a transformation programme that would reap annualised gross benefits of £2bil by March 2025 at a one-off cost of £1.3bil.
While some form of dividend cut was widely expected, the scale of the pullback is likely to dismay British institutional shareholders who rely on the income from their BT holdings.
Yet, it helps chief executive officer Philip Jansen deal with challenges on multiple fronts, including a stepped-up push into optic fiber.
The former monopoly has a heavy pension plan deficit. The coronavirus pandemic is forcing enterprise clients to cut spending, TV sport subscribers are deferring payments due to canceled matches and consumers are cancelling smartphone upgrades.
That’s offset the upside for BT from a surge in broadband traffic from home working and learning. BT now faces supercharged competition after its foremost fixed-line network rival Liberty Global Plc agreed yesterday to combine its Virgin Media unit with Telefonica SA’s wireless carrier O2, challenging BT’s dominance of Britain’s phone industry.
BT set a new target to build full-fiber connections to 20 million premises by the mid- to late-2020s “on the assumption we obtain the required critical enablers”.
BT shares were down 7.5% in early trading in London. The stock already fell 49% in the year to Wednesday, versus a 19% fall in the UK FTSE-100 and an 18% drop in the Stoxx 600 Telecommunications Index.
Of analysts surveyed by Bloomberg, 13 rated the stock a buy, seven a hold, and three a Sell. Moody’s downgraded BT’s Baa2 outlook to negative in February.
Full-year results were largely in line with expectations. The results reflected only one week of the full UK lockdown, which started on March 23. — Bloomberg
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