BT Group plc’s (LON:BT.A) (LSE:BT.A.L) stock price has gained 3.9% after it announced an agreement concerning Openreach to the stock market. The deal will see Openreach become a distinct, legally separate company from BT. It will have its own Board, within the BT Group. The agreement is based on voluntary commitments submitted by BT which the regulator has said meet its competition concerns.
Once the agreement between BT and Openreach is implemented, around 32,000 employees will transfer to the new Openreach entity following TUPE consultation, and once pension arrangements have been finalised. Openreach will have its own branding, which will not feature the BT logo. The Openreach CEO will report to the Openreach Chairman, with accountability to the BT CEO regarding certain legal and fiduciary duties.
In my view, the deal brings to an end a period of uncertainty for BT and its investors. I believe investors are averse to uncertainty, so I think the news could be positive in the long run for BT’s stock price. I feel it will allow the company to focus on other parts of its business, such as the integration of EE and the investment it is making in sports rights and in differentiating its product.
In the last month, BT’s stock price has risen 7%. That’s ahead of the performance of other TMT stocks such as Vodafone Group plc (LON:VOD) (LSE:VOD.L), SKY PLC (LON:SKY) (LSE:SKY.L), ITV plc (LON:ITV) (LSE:ITV.L) and Talktalk Telecom Group PLC (LON:TALK) (LSE:TALK.L). ITV’s stock price is down 0.5%, SKY’s shares are flat, Vodafone’s stock price is 2% higher and Talktalk has moved 4% up on a month ago.
I feel BT’s stock has long term investment appeal. I think there could be more volatility in the short run as the company is undergoing a period of rapid change and there is still some uncertainty to my mind regarding its Italian division. However, I think the deal with Openreach could help to alleviate some of the pressure facing the company. I’d still prefer Vodafone or ITV over BT based on their forecasts, but I think BT could be a good stock to own in the long run.