POPULAR SHARES: Analysts argue that BT is severely undervalued

WHAT’S GOING ON?

Mexican billionaire Carlos Slim took a 3.2 per cent stake in BT this week through his family business.

Slim, 84, made his fortune through America Movil, the biggest mobile group in Latin America. His swoop came as BT boss Allison Kirkby, who took over at the telecoms giant in February, pushes ahead with a major turnaround plan.

WHAT ARE BT’S PLANS?

Unveiling full-year results last month, Kirkby said BT would aim to save another £3billion a year by the end of 2029 through updating processes and shutting down old networks. 

She said the FTSE 100 group was exploring ‘options for all our international footprint’ which could include partnerships and selling parts of the business. But BT said the UK was its primary focus.

Despite the cost-cutting plan, Kirkby said there was ‘no change’ to its proposals to cut almost half of the 130,000 workforce by the end of the decade, including about 10,000 to be replaced by artificial intelligence.

And in a bid to charm investors, BT raised the dividend for the year by 4pc to 8p a share.

WHAT ARE SHARES DOING?

BT shares have enjoyed a recent rally as investors cheer Kirkby’s turnaround efforts and Slim’s investment in the group.

The stock has surged 6 per cent in the past week and is up 11.1 per cent since the start of 2024.

But BT shares are still down since their peak in 2015, with analysts arguing that they are severely undervalued.

SHOULD YOU BUY SHARES?

Many experts have suggested that now could be a good time to strike. Karen Egan, telecoms expert at Enders Analysis, said BT could be a good bet for investors who are looking for long-term gains. 

While acknowledging that ‘it’s not going to be an easy year for the sector’, she backed BT’s efforts to drive up profits. 

But the industry has been plagued by poor shareholder returns – meaning that investors looking for bang for their buck should proceed with caution.

WHY ARE TELECOM FIRMS UNDERVALUED?

Telecoms groups have struggled to woo shareholders because of high debt and large corporate structures, which are expensive to maintain.

They are also under pressure to keep updating their infrastructure – or risk falling behind rivals.

This backdrop has only deteriorated in an era of high interest rates and inflation. The UK market is also undervalued compared with overseas indexes – making it even harder for companies such as BT and Vodafone to thrive.