When British Telecom was privatised in 1984, it was the largest share sale in the world. More than three billion shares were sold at a price of 130p, many of them to individual investors.
At the time, BT was valued at £7.8 billion and the sale, representing a 51 per cent stake, was intended to boost competition and allow BT to expand and develop.
Millions more shares were issued after 1984 and today BT is valued at £21 billion. About 725 million shares are still owned by private investors, including me. We have not done very well.
Trading trends: Today BT is valued at £21 billion with around 725 million shares still owned by private investors
BT closed last week at 210¼p, having fallen from a high of more than 1,000p in 1999. The firm has faced a rapidly changing market, stringent regulation and an onerous pension deficit. Since privatisation it has seriously underperformed the FTSE 100 index of leading shares.
A £1,000 investment in that index would be worth £17,772 today if all dividends were reinvested. That same investment in BT would be worth £9,872 – a hefty sum, but dwarfed by the Footsie’s returns.
According to broker AJ Bell, only one of BT’s recent chief executives, Ian Livingston, delivered a rise in the share price. The rest presided over declines, especially Gavin Patterson, who took the helm in 2013.
Earlier this month, BT chairman Jan du Plessis announced that Patterson would be leaving this year and that BT had already started looking for his successor.
The news came shortly after BT revealed disappointing results for the year to March 2018, including a year-on-year fall in turnover and underlying profit.
An Italian accounting scandal erupted 18 months ago. There were fines and profit cuts, issues with the regulator and criticism of Patterson’s decision to pay almost £1 billion to screen Premier League matches.
So what must shareholders do now? Should we hang on, hoping for better times, or sell now, having endured years of underperformance?
On the same day as those sub-optimal results were released last month, BT announced a comprehensive strategy designed to deliver growth. Over the next three years, the firm will remove 13,000 middle managers – equivalent to a chunky 13 per cent of the workforce.
At the same time, du Plessis intends to hire 6,000 new staff, mainly to work in call centres in Britain, and as engineers to roll out super-fast broadband.
BT also hopes to cut costs by £1.5 billion, improve customer service and turn the business from a lumbering giant to a nimble communications group fit for the 21st century.
The task is huge, but BT has taken some steps in the right direction, particularly with the acquisition of mobile phone network EE.
Relations with regulator Ofcom have improved, a long-term plan is now in place to address the pension deficit, the Premier League costs have gone down and a partnership has been agreed with arch-rival Sky.
The dividend is another point in BT’s favour. Yes, it was announced that it would stay at 15.4p during the release of the recent results, but that still makes BT one of the highest yielding shares on the stock market, at more than 7 per cent.
BT has also pledged to maintain the dividend for the next two years, hoping to increase it thereafter.
Midas verdict: BT has been a dog but, with the price at 210¼p, now is not the time to sell. Long-suffering shareholders should stick with the group and see if the price improves once a new boss is appointed. Several top stockbrokers even rate the shares a buy.
Traded on: Main market Ticker: BT/A Contact: btplc.com or 0808 100 4141