To me, the BT (LSE: BT.A) share price looked built for volatility. The FTSE 100 telecoms giant was a huge, sprawling concern, with its fingers in too many pies, and long-standing problems it still hasn’t fully addressed. But has something fundamentally changed?
BT Group had a vast pension scheme, hefty £20bn net debt, and a habit of pursuing questionable strategies. The lurch into sports broadcasting never sat comfortably with me, draining resources and distracting from the core job. It’s now beaten a sharp retreat and rightly so. Telecoms is tough enough on its own, demanding constant investment in infrastructure, and a relentless battle against smaller, nimbler rivals.
FTSE 100 basket case?
A couple of years ago, I noticed BT shares looked stunningly cheap. The price-to-earnings ratio sat around six, and the yield nudged 7%. I was tempted but held back, worried its problems ran too deep. I felt it was cheap for a reason, and could get cheaper still. Instead, I missed a remarkable recovery under CEO Allison Kirkby*.
*Correction: The article previously stated the CEO of BT as Amanda Blanc instead of Allison Kirkby.
She’s presided over an impressive comeback. Full-year 2025 results showed reported pre-tax profits climbing 12% to £1.33bn. Investment in Openreach fibre infrastructure has peaked, and the benefits are starting to roll in. Blanc is targeting £2bn of normalised free cash flow by 2027, and £3bn by the end of the decade.
But it’s not all rosy and we can’t escape the fact that legacy issues remain. Q3 results on 5 February were patchy, with revenue down 4% to £5bn. Pre-tax profit slipped, but that was mostly due to a £214m loss from its TNT Sports joint venture with Warner Bros Discovery. Yes, Openreach added another 571,000 customers net, with total fibre connections hitting 8.2m. But the trick is hanging on to them. It’s bleeding customers at the rate of 200,000 a quarter.
I’m stunned by how the shares have held firm during today’s Iran turmoil. Over the last bumpy month, they’re up 2.2% and 18% over three months. I’m surprised at their resilience. The one-year gain stands near 30%, and over two years they’ve surged 97%. BT is clearly a very different beast today.
Telecoms firms are capital intensive, operate in competitive markets and face constant pricing pressure. Yet investors seem confident in BT’s ability to deliver steady returns, even in choppy conditions.
Income and valuation
The easy gains have probably gone. The shares no longer look like a bargain, with the P/E now around 11.5. That’s still reasonable, but it’s a step up from the rock-bottom levels seen before. As the shares climb, the trailing yield has slipped to 3.8%.
Net debt is still around the £20bn mark, roughly in line with its market cap, and the pension scheme issue hasn’t vanished. If the cost-of-living crisis returns with a vengeance, more customers could shop around for cheaper mobile and broadband deals.
Yet BT is a far steadier business than I ever imagined. The dramatic rebound phase is largely behind it, but it now looks like a credible long-term hold, and well worth considering today. That said, others may prefer shares that have been knocked harder by recent volatility and offer earlier-stage recovery potential.
