BT Group plc’s (LON:BT.A) (BT.A.L) share price has dropped 1.7% after it was fined £42 million by Ofcom. Ofcom found that BT Openreach had breached its contractual and regulatory obligations by inadequately and retrospectively applying Deemed Consent for the period January 2013 to December 2014.
Deemed Consent is an agreed process between BT Openreach and its Communications Provider customers which allows the former to postpone the installation and reschedule the delivery date for providing dedicated business services in a number of specific circumstances.
Ofcom also found that BT Openreach failed to compensate Communications Providers adequately after successful appeals against the application of Deemed Consent during the period October 2013 to August 2016.
BT Openreach has therefore agreed to compensate Communications Providers outside of BT in full, and Ofcom has imposed a fine of £42 million. Compensation payments and the fine will be treated as a specific item charge, with BT’s trading outlook for FY2017 and FY2018 unchanged.
Since the start of the year, BT’s share price has slumped 12%. This is below the performance of other TMT stocks such as Vodafone Group plc (LON:VOD) (VOD.L), SKY PLC (LON:SKY) (SKY.L) and Talktalk Telecom Group PLC (LON:TALK) (TALK.L). SKY is down 1%, Talktalk is 7% higher and the Vodafone share price is up 4%.
In my view, BT has investment appeal. I believe it has endured a difficult period of late, with a profit warning also hurting investor sentiment this year. However, I feel it has a good business model through which to compete with the likes of Vodafone, SKY and Talktalk.
Although BT’s share price may remain volatile in the short run, I think the investment it is making in sports rights and in the integration of EE could lead to relatively good performance in the long term. Therefore, I believe its underperformance versus rivals in 2017 may be reversed.