BT Group Plc Ramping Up Efforts to Face the Challenge of Virgin Media & O2 Combine

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BT Group Plc Ramping Up Efforts to Face the Challenge of Virgin Media & O2 Combine

 BT Group Plc Ramping Up Efforts to Face the Challenge of Virgin Media & O2 Combine

In a new 50-50 joint venture, the cable company, Virgin Media, a subsidiary of Liberty Global Plc is going to merge its operations with Britain’s biggest mobile operator, O2 (Telefonica UK Limited) in the United Kingdom and the deal is expected to finalise by mid-2021. Under the deal, Liberty Global Plc will receive circa £1.5 billion, and Telefonica UK Limited will receive nearly £6 billion in recapitalisations. The newly formed entity is likely to have long-term debt of approximately £20 billion in its balance sheet. The newly formed entity is likely to have a customer base of more than 45 million and would have a revenue generation of more than £10 billion as per some industry reports. With UK and US trade negotiations underway, the UK is poised to be an attractive investment destination. The newly formed Joint Venture is likely to invest in 5G and high-speed broadband services. The merger seems to be more of consolidation during the storm created by the novel coronavirus. The Joint Venture would offer TV, mobile and broadband packages at competitive prices, aimed at challenging the BT Group and other players. In the current scenario of uncertainties induced due to Covid-19, consolidation in general is likely to occur across sectors. The telecom industry has always been the highly regulated and competitive industry.

Vodafone Group Plc, BT Group Plc, O2 (Telefonica UK Limited), EE Limited and Three are the main network providers in the United Kingdom.

In 2016, in a similar fashion, BT Group Plc struck a deal of £12.5 billion with the UK’s most advanced digital communications company, EE Limited.

BT Group Plc likely to invest in fibre to offer high-speed internet

BT Group Plc is a UK based communication services organisation. The company's services portfolio comprises of managed networked IT services, fixed voice and data, mobility, television, connectivity, and broadband services. It also offers copper and fibre connections between exchanges and homes and businesses. The company has a business presence across Asia-Pacific, Europe, the Middle East, Africa, and the Americas.

The outbreak of Covid-19 has exposed the need for high-speed internet. BT Group Plc (LON: BT.A) recently announced its results for the fiscal year 2020. The company aims to speed up laying out FTTP in 20 million premises by the latter half of 2020. The company’s ambitious plan includes rural areas. The company is likely to generate pre-tax nominal returns of between 10 per cent to 12 per cent and is strictly working in accordance with the Ofcom's policies.

BT Group Plc’s results for the Financial Year 2020 were in line with expectations. Due to the adoption of IFRS-16, the reported revenue was down by 2 per cent to £22,905 million. The company’s reported profit before taxation was down year on year to £2,353 million, while due to implementation of IFRS 16, the net debt of the company was up substantially.

As the company is withering through the Covid-19 crisis, it looks forward to preserving cash and manage investments. Therefore, the company has suspended the final dividend for the fiscal year 2020 and all dividend pay-outs for 2021. However, the company is likely to resume dividend pay-outs in 2022. The company did not provide a financial outlook for 2021 due to the uncertain environment created by Covid-19.

On 11th May 2020, at the time of writing (before market close, GMT 2:28 PM), BT Group Plc shares were 0.33 per cent up against its previous day closing price at GBX 105.30. Stock's 52 weeks High and Low is GBX 212.25/GBX 101.10. At the time of writing, the share was trading 4.15% higher than its 52-week Low and 50.39% lower than its 52-week High. With an annual dividend yield of 14.68 per cent, the beta of the company stood at 0.85. The total M-Cap (market capitalisation) of the company while writing stood at £10,371.38 million.

The Telecom industry of the UK amid Covid-19

Amid the outbreak of coronavirus, the telecommunication services are one of the few sectors which not only have been up and running but have also contributed to the nation in terms of making the social distancing feasible and lockdown a success. The technology has allowed the users to keep in touch with their near and dear ones. The pandemic since its outbreak in the last week of January has claimed around 35 thousand lives in the United Kingdom. People are advised to maintain social distancing and to stay at homes. The rapid spread of the pandemic over the past few months has worsened the situation for global trade and has also caused devastation across the sectors. The global trade is likely to grow at minus 3 per cent in 2020, as per the IMF.

Telecom infrastructure has not only brought people closer but also helped the global economy to survive as “work from home” has become a standard practice in most of the economies. The employers, primarily in the services sector, encouraged people to work from home rather than risking their lives in coming to the office. In addition, due to lockdown induced by Covid-19, virtual classes have become a reality, schools and colleges are offering courses online. Also, with people looking forward to home entertainment, their usage and dependence on the internet have gone up manifolds.

Other businesses whose operations are disrupted due to Covid-19, are fine-tuning their business models to acquire, deliver and service customers through online platforms. All this has been possible because of telecom infrastructure in place and evolution of the industry. As the easing of lockdowns look far and adhering to Covid-19 guidelines being a way of life, the reliance on telecom infrastructure will consistently increase.

The telecom infrastructure facilitates communication in the form of voice or data over the network. It serves as the backbone of economic and social activity across the world. This infrastructure is set up by telecom companies. In a telecom network, the core equipment and services are the main sources of processing customer information. The Non-core equipment and services refer to the base stations and antennas installed on rooftops and masts.

With UK-US trade negotiations underway, the telecom infrastructure would play a key role in boosting the country’s digital economy. The UK can foster key developments in areas of data flows, blockchain, driverless cars and quantum technology. The telecom infrastructure will play a significant role in the avoidance of trade distortions and promotion of fair and transparent access to the telecommunications market in the United States. In addition, the network infrastructure would provide UK consumers and businesses with greater accessibility and connectivity in the US market.

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