BT

My last “Trader Tuesday” article was based around Vodafone, so it seems fitting to focus today on rival BT. The telecoms giant has confirmed it is in talks to expand its wireless offering and with EE and O2 both interested in merger talks this leaves BT in a strong position not to pay over the odds for either of the companies. That is one reason the stock is up over 4% from yesterday’s open. The other reason is that it simply makes perfect sense. The “quad play” i.e. broadband, home phone, Pay-Tv and Mobile, as it is becoming known as is something that rivals such as sky, virgin and now Vodafone are all trying to offer. This merger will make BT a serious player in the quad play market, which its rivals will watch closely.

This morning their share price is at the 400p mark. Historically, that’s a long way off the £10 mark back in 1999, but the company has had serious difficulties since then. Ironically in 2002 when it was struggling, it spun off its wireless division BT Cellnet which then rebranded itself as O2 and eventually was bought for an approximate £17Bn by Telefonica! You’d think after that calamity spin off that BT wouldn’t want reminders of what could’ve been with O2, but these latest talks shows it is determined to succeed! After the credit crises BT like most stocks was struggling badly and reached a low of 70p in early 2009 but it naturally corrected with the overall market, working its way back to the 200p mark. The uptrend since then has been beautiful. Since the aggressive launch of BT sport, its Pay-Tv and broadband business has grown significantly, making it a significant player against rivals Sky and Virgin. As I said this latest move makes perfect sense, and from a technical perspective I would be surprised if I didn’t see the stock attempt to break recent high at 421p. However one note of caution would be that competition within this market is only going to get tougher and tougher.

Good Luck,

Vinay

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