Investors ramp up bets in opposition to BT as new boss prepares annual outcomes

Four major investors have ramped-up bets against BT Group this year as its new boss prepares to update shareholders on the telecoms giant’s progress later this week.

Canada Pension Plan Investment Board, BlackRock, AKO Capital and Kintbury Capital have collectively amassed a short position of almost 2.8 per cent of BT shares, regulatory data shows, reflecting bets against the group worth around £300million in aggregate.

BT faces concerns about so-called ‘alt net’ competition and plans to cut tens of thousands of jobs, slash costs, and aggressively expand its ultrafast full-fibre broadband across the UK, through its subsidiary Openreach, and its 5G network.

New boss Allison Kirkby faces concerns about poor share price performance and the UK roll-out of ultrafast full-fibre broadband

Chief executive Allison Kirkby, who replaced Philip Jansen in February, will on Thursday reveal the group’s financial results for the year, which are expected to show profits of more than £6.1billion for 2023 on the back of higher prices.

Investors will be keeping a close eye on Openreach, which saw line losses for the first time last year, as well as free cash flow amid bumper spending plans.

BT aims to complete its broadband roll-out work by the end of 2026, when it says 25 million homes and businesses will be connected.

Up to 55,000 roles are set to be cut across the business by 2030, once new networks take over from old and as part of plans to digitise more processes.

Kirkby – a non-executive director of BT since 2019, who will earn £1.1million a year and an annual bonus worth as much as double her salary depending on the firm’s performance – will also be tasked with executing a cost-saving target of £3billion by the end of 2025.

BT shares have endured a torrid period in recent times, falling by more than 11 per cent since the start of the year and almost 46 per cent over the last five.

Investment bank UBS warned last month that ‘things will get worse before they get better’ for BT, estimating that Openreach line losses will widen to 489,000 this year ‘and remain elevated for the coming years’.

Some investors reportedly also want BT to scale back mobile and broadband investments and put their money into other industries.

UBS also forecasts that BT will face further pressure on free cash flow as a result of greater spending, potentially forcing it to slash its dividend in half this week.

Reaffirming its position this week, UBS said: ‘We do not expect significant changes to the strategy or the perimeter of the group from the new CEO.

‘However, rising broadband infrastructure competition means we expect broadband line losses at Openreach to be worse.

‘Normalised [free cash flow] guidance could beat if BT leaves capex unchanged, but we think Openreach needs to accelerate fibre rollout in order to preserve its position and, along with the prospect of higher restructuring charges, this will put pressure on reported FCF, risking a dividend cut.

‘On the portfolio, we think bulls will be hoping for a stake sale in Openreach or other divestments to unlock value, but we see this as less likely given the bulk of any proceeds will likely flow to the BT Pension Scheme and any remaining proceeds would more likely be used to accelerate fibre rollout rather than go to shareholders.’