The BT Group plc (LON:BT.A) (BT.A.L) share price has endured a difficult year so far. It’s down 17% and many investors seem to be less positive now than they were at the start of the year.
This doesn’t surprise me. BT has released news of problems in its Italian division since the start of the year. As well as causing investor sentiment to decline, the news also meant the company released a profit warning. This sent the BT share price lower and meant its growth outlook was lower than had previously been expected.
While it would also not surprise me if the BT share price remained lacklustre in terms of its performance on a relative basis versus sector peers in the short run, I think the stock has long-term investment appeal.
I believe the deal to separate Openreach is a good one. It could reduce the uncertainty surrounding the business over the medium term, and also allow a greater focus on the company’s ‘core’ operations such as fixed-line and pay-tv.
I’m also optimistic about the prospects for EE. So far, the integration of EE is progressing well to my mind. It has the potential to create significant cross-selling opportunities, while also providing BT with a more dominant position within the quad play space. At a juncture where product diversification and competition within the quad play space is increasing, the acquisition of EE could turn out to have been a good move.
Since BT has a P/E of 10.6, I think it offers good value for money. Although its valuation could move lower (as any share valuation could), I feel there is potential for a higher P/E further down the line. The investments it is making in sports rights and in improved customer service could lead to greater product differentiation and higher customer loyalty in my view.
While it may take time for such efforts to filter through to a higher BT share price, I’m relatively optimistic about the company’s prospects.