Telecom giant BT (BT.A) has unnerved investors as its pension deficit soars from £6.4bn in March to £11.5bn in the six months to 30 September, largely as a result of lower real discount rates post the Brexit vote.
The broadband company is trading 2.6% lower at 377.53p despite increasing sales by over a third to £6bn in the first half to 30 September, largely thanks to its £12.5bn takeover of mobile phone operator EE.
The pension black hole seems to be the big worry for many investors. AJ Bell investment director Russ Mould has even gone as far as to suggest that BT’s widening pension deficit may put dividends at risk.
But not all market experts are so gloomy. The Share Centre investment research analyst Graham Spooner says investors should appreciate the impact of the EE takeover as BT is on track to hit full year expectations.
Spooner continues to recommend BT shares to investors with a medium risk appetite and a balanced portfolio, largely on the basis of the group's ongoing transformation into a dominant multi-play telecoms services and content provider.
It’s been a tough year for BT after its rivals, including TalkTalk (TALK) and CityFibre (CITY) teamed up to ask Ofcom to cap its mobile network capacity ownership to allow smaller operators greater freedom to compete. Ofcom’s decision not to force the break-up of BT and Openreach in August came as a blow to peers but a boon to BT.
Adjusted operating profit at the interim stage jumped 24% to approximately £1bn, although equivalent earnings added just 4% thanks to the flood of new shares issued to buy EE. The interim dividend has been hiked 10% to 4.85p.
