Annual results from BT Group PLC (LSE:BT.A) next week come at a key time for the telecoms giant.
Fans point to the potential for cash flow to surge once the fast fibre upgrade to broadband arm Openreach's network is concluded around the middle of the decade.
Others don't see it as being that easy with rival networks building out rapidly while BT has to contend with a huge pension deficit and expectations for decent dividends from shareholders.
On the positive side, BT is benefiting from above-inflation price rises, says UBS, and French billionaire Patrick Drahi’s Altice has built up its stake to 18%.
Drahi has previously played down any takeover talk though the broker notes Altice’s preclusion period for making a bid expires on 14 June 2022.
On the negative side, the CWU is threatening industrial action unless wages are increased by 10% and this could slow earnings momentum (BT’s total wage bill is £4.5bn a year) and wipe out the benefit of the recent price rise.
“Separately, we see rising infrastructure competition for [broadband arm] Openreach with Cityfibre gaining traction and Virgin Media expanding its footprint to 80% of the country (from 50%) and looking to wholesale its existing network.”
That could damage the value being attributed currently to Openreach, says UBS, which it estimates at £18bn (or the entire market cap of BT as of today at 176.6p).
Forecasts for BT’s fourth-quarter update next week are for revenues to ease 1.5% to £5.2bn, with underlying profits up 3.5% to £1.8bn.
Full-year profits (to March 2022) should be around £7.76bn according to consensus estimates with BT guiding for at least £7.9bn in the current year to March 2023.
Any change to that guidance, either plus or minus, is something else to watch carefully.