BT Group to sell its stake in its wholly-owned network subsidiary Openreach

Written by: Wajeeh Khan
June 23, 2020
  • BT Group is negotiating with infrastructure investors to sell its stake in its subsidiary Openreach.
  • The British telecoms company will face fierce competition from Virgin Media and O2 merger.
  • CEO Philip Jansen purchased £2 million worth of company shares as a show of confidence.

BT Group (LON: BT.A) said on Thursday that it is negotiating with infrastructure investors to sell its stake in Openreach. BT currently has a multi-billion-pound investment in the network subsidiary. The raised funds from the sale of its wholly-owned subsidiary, the company added, will be used to expand its presence in the UK’s full-fibre broadband network.

The announcement came on top of BT’s decision to suspend its dividend last week in a bid to cushion the economic blow from the Coronavirus pandemic. The move had pushed its stock down to an 11-year low and reduced its market capitalization to £10 billion. Cancelling its dividend, as per the analysts, is likely to save £3.3 billion for BT.

BT holds talks with a sovereign wealth fund and Macquarie Group

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As per the sources, BT starting holding discussions with potential investors including a sovereign wealth fund and Macquarie Group (Australian investment firm) at the end of April. BT, however, failed to spark Macquarie’s interest in an agreement, the sourced added.

BT refrained from commenting any further on the recent news.

According to CEO Philip Jansen, upgrading the broadband network in the United Kingdom to full-fibre is the core of his strategy for the company. But extending the fibre broadband network to 20 million countrywide households before the end of 2020 is expected to cost roughly £12 billion.

The CEO further added that COVID-19 has fuelled a sharp increase in the use of data and mobile phones at large that has turned the network upgrade from a luxury to a necessity.

BT Group to face fierce competition from O2 and Virgin Media merger

BT Group is anticipated to see fierce competition in the future in fixed-line, mobile, and TV sectors as O2 and Virgin Media merge to form a new giant in the market. Jansen, however, is committed to the plans of upgrading the UK’s broadband network. The CEO expressed confidence that the government and Ofcom (regulator) will help establish the right conditions for the upgrade.

As a show of confidence in the London-headquartered company, he also purchased £2 million worth of company shares earlier this week on Wednesday. As per the stock market filing, BT’s non-executive director and chairman also bought stock.

BT is currently around 45% down year to date in the stock market. At the time of writing, the British multinational telecommunications holding company has a market cap of £10.65 billion and a price to earnings ratio of 6.15.