BT is right to ignore distractions and keep digging for Britain | Nils Pratley


Hurrah, BT saw the light. He ditched the idea of ​​forming a complicated joint venture to help finance the deployment of all-fiber broadband. This tentative proposal still smacked of management obsessed with the short-term share price and overly concerned about possible takeover bids. Better to keep it simple by digging for Britain and getting the kit in the ducts ASAP.

The change of mind appears to have been prompted by the discovery that, when focusing on the work at hand, BT can cut some of the costs and thus fund the deployment of 25 million premises by 2026 on its own. . Average construction costs have been reduced from £ 50 to £ 250-300 per room, which represents a significant saving. The capital spending madness, which had made investors nervous, will now peak at £ 4.8bn in 2023, down from £ 5bn.

That’s a reassuring figure for shareholders who fear that the riches in fast fiber are too far away to feel real. Explaining it to them in precise numbers, chief executive Philip Jansen has promised “an expansion of at least £ 1.5 billion in normalized free cash flow” by the end of the decade compared to 2022.

The speech should therefore be easy to understand: spend a lot for a few years, strengthen your leadership in a broadband market with monopoly functionalities and be rewarded later thanks to the “fair bet” conditions obtained with the regulator, Ofcom. Now that the dividends are back, you are also paid to wait in the form of a 5% return.

The potentially complicating factor is the presence of French billionaire Patrick Drahi, whose Altice Group bought a 12% stake in BT earlier this year. Drahi’s intentions remain unclear, but it can probably be said this: A takeover bid that relies on reducing investment by removing hard-to-reach premises would be a failure, politically speaking. The new National Security and Investment Law could almost have been drafted with BT in mind.

In any case, the best defense against a takeover bid is a healthy stock price. On this point, Jansen’s more detailed financial projections resulted in an 11% increase to 158p. There is still some way to go to recover the 200p seen in the excitement after Drahi’s arrival, but the way seems clearer. Ignore distractions and hurry with the fiber.

Metro shareholders may well be open to a sale

Metro Bank is the challenger bank that has ended up questioning the wealth of its lenders. Once upon a time – just three years ago – the so-called banking revolutionary’s shares traded for up to £ 40. After an amateur misrepresentation scandal that sparked a (still unresolved) regulatory investigation, boardroom clean-up and a gigantic recapitalization, they sit at 133p – and that’s after the 29% pop of Thursday when interest was announced in an offer from private equity firm Carlyle.

The motive behind Carlyle’s approach is unclear. The start of a larger adventure in consolidating UK third-tier lenders? Or just an opportunistic attempt to grab Metro, and a mortgage portfolio dominated by residential mortgages, at a time when CEO Dan Frumkin may have stabilized the ship? The latter seems more likely and, with Metro only worth £ 230million, Carlyle would not bet the farm.

After the accounting calamity of 2019, a takeover was the most likely final chapter of Metro’s stock-rich period in the London market. Frumkin’s recovery plan is a multi-year affair. It is suspected that Metro’s weary, mostly American, shareholders would accept a reasonable offer to sell. This assumes that regulators would bless private property, which is not obvious.

CMA’s Footasylum decision is baffling

The Autorité de la concurrence et des Marchés is adamant: Footasylum must be safeguarded for the nation, or at least for its customers, who it says “would probably pay more for less choice, worse service and lower quality” if the property of JD Sports was authorized. stand.

The £ 90million takeover took place as long as 2019, and this is the second time the CMA has released the figures. So JD should probably give up trying to reverse the decision and do what the officials ask and sell the channel.

But the fury of JD boss Peter Cowgill is right. The decision is baffling. Footasylum, by the time its board of directors surrendered, was adding little competitive edge to the sneakers and athletic wear market – the company is gone at half of its 2017 IPO value. time, the juggernaut is the direct-to-consumer operations of Nike and Adidas, which Footasylum seems more likely to resist under JD’s protection.

But these arguments came to nothing. Footasylum has around 70 stores, which is tiny in the context of JD, which is active globally. Let it go.


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