BT Shares Rise on Bharti Deal

Key Morningstar Metrics for BT

• Fair Value Estimate: 200p
• Morningstar Rating: ★★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

The company’s market value rose nearly 7% on Monday to just under 140p, leaving the stock still adrift of the Morningstar fair value estimate of 200p per share. Excluding dividends, the share price has risen more than 11% in the year to date.

Morningstar equity analyst Javier Correonero says the deal doesn’t affect the investment case for BT, especially as Bharti will not seek a seat on BT’s executive board.

“So far it looks like a political move to improve India-UK relationships more than anything else,” he adds.

There are already established links between Indian business and UK plc: Tata Motors owns luxury car marque Jaguar Land Rover, while Tata Steel owns plants in South Wales. 

Eyeing Up Openreach

While the deal would see Bharti as a substantial shareholder in BT, the stake leaves it short of the 30% level at which a company is legally required to make a takeover approach.

Susanah Streeter, head of money and markets at Hargreaves Lansdown, said in a note that the move shows the Indian company thinks there is “long-term untapped value” in BT. She notes Openreach, the company responsible for rolling out new fibre networks, is the real prize for Bharti.

BT chief executive Alison Kirkby said in a statement: “We welcome investors who recognise the long-term value of our business, and this scale of investment from Bharti Global is a great vote of confidence in the future of BT Group and our strategy.”

With a yield close to 6% and a narrow economic moat, BT features on our monthly dividend screen.