ALEX BRUMMER: Division over BT’s future


BT shares briefly rallied at the end of August when it was revealed the telecoms group is bolstering its investment banking advice with the recruitment of Goldman Sachs.

Since then the stupor has returned, and with the shares at 103.5p in latest trading, it now values the nation’s telecoms champion at just above £10billion.

Chief executive Philip Jansen, after a dazzling career in private equity and at fintech firm Worldpay, is acutely aware that shareholder patience is stretched.

British Telecom chief exec Philip Jansen, after a dazzling career in private equity and at fintech firm Worldpay, is acutely aware that shareholder patience is stretched

He and the board need to act to restore confidence and shore up finances for a big investment in the fibre broadband network. 

Jansen favours radical change to unlock value, but is also aware of potential difficulties in executing deals, most notably the pension fund deficit estimated at between £7billion and £8billion. 

Because of its size and importance, regulators, including the Pensions Protection Fund, long have taken a special interest in BT.

Jansen is understood to have looked at a number of ways of funding ultra-fast broadband roll-out and bolstering shareholder value. 

Among the ideas discussed is demerging the mobile network EE, bought for £12.5billion in 2016. Another possibility is splitting off Openreach, the infrastructure arm of the group which has been valued at £20billion.

An alternative might be to follow the recent example of another struggling communications group Telecom Italia and bring in a private equity partner. KKR is among those reported to have BT in its sights.

Jansen, who wants to do the best for investors, is finding it hard to rustle up board support for the various options on the table. 

The group finance director, Simon Lowth, a refugee from oil and gas exploration concern BG, is thought to be unenthusiastic about radical change in spite of the appalling share price performance.

Chairman Jan du Plessis, who has extensive experience of deal making, has thus far not asserted himself as the differences between Jansen and Lowth have developed. BT has an experienced board, which includes former Centrica boss Iain Conn and Ian Cheshire, formerly of Kingfisher.

Their services will be required if BT’s bombed-out stock price is to be revived and the promised speed-up of fibre roll-out achieved.

Value added

The full year update from Primark confirms this paper’s message.

Britain’s city centres are in deep trouble, not helped by ridiculous traffic management decisions taken in London, which look designed to create gridlock at a moment when big private equity firms are offering employees taxi transport if they fear Covid-19 infections on crowded commuter routes.

There is a second message. If you give shoppers what they want, value at accessible locations such as shopping centres, they come back in droves.

As John Bason, finance director of owner Associated British Foods points out, Primark is achieving a higher share of fashion sales than before the pandemic. Both footfall and transaction levels are up.

This is a huge improvement from the start of the pandemic when Primark – which lacks an online offering – was haemorrhaging cash and for a time declined to meet rental demands. 

The remedial action looks to have worked and full-year profits, while sharply down on 2019, are likely to come in at the top end of expectations. 

ABF is also building balance sheet resilience, with net cash expected to be £1.3billion at the end of the year up from a previous estimate of £750million.

As it happens, there was never really any kind of existential threat at Primark because it is a miller, baker, branded food company and the UK’s dominant sugar firm as well. Except for a dip for Ovaltine, much of the rest looks to have done well in the pandemic.

No need to pass the hat around for the controlling Weston family Wittington trusts quite yet.

Tokyo whale

The naivety of governments when it comes to business knows no bounds. 

When Softbank boss Masayoshi Son presented himself to the Government as a safe long-term investor in Cambridge-based ARM Holdings four years ago, Theresa May’s administration treated the assurances as gold plated. 

The gradual dismantling of parts of ARM, and the intention to sell, has proved a betrayal.

Softbank’s latest market ploy, a £37billion bet on US tech through complex derivatives, shows Son to be no more than an irresponsible gambler with deep pockets distorting the value of savings of citizens across the globe. Unconscionable.

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