BT Group PLC (LON:BT.A) directors are at odds over whether to trim the dividend further, according to reports ahead of Thursday’s final results.
Mirroring the split among analysts over whether the telecoms colossus needs to accelerate investment at its Openreach infrastructure arm to pave the way for higher longer-term profits, there is also now disagreement in the boardroom, the Telegraph newspaper reported over weekend.
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While chairman Jan du Plessis wants to maintain the payout, with the City consensus forecast currently pointing to an unchanged total of 15.4p for the recently completed financial year, even taking into account the 5% cut to the interim payment last year.
BT has cut its dividend very deeply twice during its history as a quoted company and the Telegraph emphasised that a key consideration is the Afrikaner’s own credibility, after he insisted last year that the dividend was safe.
New chief executive Philip Jansen, who joined from Worldpay in February, is reported to prefer cutting shareholder payouts to ease Openreach’s roll-out of faster and more reliable fibre-to-the-premises (FTTP) broadband to replace old copper lines.
Jansen was brought in replace former boss Gavin Patterson after five and a half years, with the shares no higher than they were in 1996.
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Broker Numis said on Tuesday that the Telegraph's assertion are “more likely incendiary than factual”, suggesting that before Jansen commits BT to more capital expenditure to deploy FTTP faster, he will “first want to be confident that this extra spend has reasonable scope to earn BT's owners appropriate, incremental value”.
Analyst John Karidis pointed out that regulator Ofcom will not settle on most key details of the new regulatory framework around FTTP until shortly before the start of the 2022 financial year, especially with BT having repeatedly called for more clarity on regulatory terms, including pricing and recovery on the old copper network.
“By the time BT gets clarity on these four issues, if it becomes practically possible to do so, we believe Opereanch will be able to deploy FTTP faster without also causing BT Group capex to increase,” Karidis said.
Analysts have suggested that if a dividend cut does not materialise this year may come in coming years due to a combination of pressure on profits, the £5.3bn pension deficit and a £12bn net debt pile.
Thursday's results are expected to see fourth-quarter EBITDA slide 9% to £1.86bn as underlying revenues decline almost 3% to £5.78bn, giving an estimated full-year top line of £23.38bn, with £7.41bn of EBITDA and adjusted earnings per share of 26.6p.
Shares in BT were little moved on Tuesday at 225.7p, down around 5% in the year to date.