Can BT reverse its underperformance of Vodafone, ITV and Talktalk?

Can BT Group plc (LON:BT.A) (BT.A.L) shares outperform shares in Vodafone Group plc (LON:VOD) (VOD.L), ITV plc (LON:ITV) (ITV.L) and Talktalk Telecom Group PLC (LON:TALK) (TALK.L)?

BT Group plc
BT Group plc

Since the start of the year, the BT Group plc (LON:BT.A) (BT.A.L) share price has fallen 14%. At the same time, other TMT stocks such as Vodafone Group plc (LON:VOD) (VOD.L), ITV plc (LON:ITV) (ITV.L) and Talktalk Telecom Group PLC (LON:TALK) (TALK.L) have risen. For instance, Vodafone shares are 2% higher, ITV is up 5% and Talktalk shares are 12% higher.

In my view, investor sentiment in BT could stay low for a little while. The problems in its Italian division have not yet been fully resolved in my opinion, and its financial performance is forecast to suffer in the next couple of years. This could lead to more share price underperformance at a time when things could be on the up for Vodafone, ITV and Talktalk.

However, I think in the long run BT could perform relatively well. I feel the integration of EE could lead to a much stronger and diversified business which is capable of registering improving earnings per share performance. I also believe the deal to remove the BT name from Openreach could free up management resources to tackle other key areas for the business.

One of those is investment in sports rights, which I think could be a differentiator for the business in the long run. Although it costs a significant amount of capital in the short run, BT is gradually emerging as a genuine competitor to Sky.

BT has a P/E of approximately 11.4. I think this represents fair value for money given its uncertain near-term outlook. Although the quad play sector is becoming more competitive and Vodafone and Talktalk are clear competitors to BT, I also think there could be cross-selling opportunities ahead.

Therefore, the BT share price may experience improved performance relative to TMT peers such as Talktalk, ITV and Vodafone in the long run. This means it has investment appeal in my opinion.

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