BT share price could slide as doubts may linger after Huawei comments
BT CEO Philip Jansen says removing Huawei from the UK’s telecoms infrastructure fully by 2030 is impossible. What does that mean for the BT share price?
The UK government is set to confirm that no new 5G equipment from Chinese tech giant Huawei can be integrated beyond next year, with all existing 5G equipment requested to be removed just a few years later. However, BT Group CEO Philip Jansen claims that it would be ‘impossible’ to remove Huawei technology entirely from the UK telecoms infrastructure in ‘under ten years’.
BT’s EE network is heavily intertwined with Huawei technology, with its equipment helping to power BT’s 2G, 4G and 5G connectivity. Jansen said Huawei has been a part of the UK’s telecoms infrastructure ‘for about 20 years’.
Mr Jansen warns that if the industry is encouraged to remove all Huawei equipment too quickly 'outages would be possible' nationwide.
Jansen also anticipates ‘15 to 20 big software upgrades’ for its existing Huawei infrastructure. He warns that if BT and other tech firms aren’t permitted to proceed with these upgrades, it would result in ‘gaps in critical software that could have security implications’. These implications – and outages – could have a damaging reputational impact on BT services and its share price.
BT share price continues to underperform compared with FTSE 100
During the last five years, the price of BT shares have plummeted by as much as 75%. It’s left a lot of brokers and traders scratching their heads as to why BT has performed so badly, compared with the FTSE 100’s modest 9% decline overall.
The biggest issue for BT has been their inability to drive improving balance sheets, with profits lagging behind several of its tech rivals despite considerable investment in its 4G and 5G network. However, being wedded to Huawei technologies could prove to be BT’s undoing.
Lowered target prices cement bearish view of BT shares
During May and June, at least five leading brokers have slashed their target prices for the BT share price, ranging from as low as 110p to highs of 220p.
Earnings forecasts for 2020 and 2021 have also been projected to fall considerably, with its consensus earnings per share forecast for 2020 declining by almost 15%.
Is it worth going ‘long’ with the BT share price?
It’s important to note that while most brokers are increasingly bearish on the BT share price, this sentiment is not shared by many of BT’s board members, seven of which have recently invested heavily in BT shares. CEO Philip Jansen acquired 1.834 million BT shares in May at a cost of more than £2 million. Meanwhile, chairman Jan Du Plessis increased his own holdings in BT stock by 166%, buying 500,000 shares at a cost of £530,000.
What does this mean for retail traders? Given that top-level shareholders are choosing now as the right time to invest in BT shares, despite the technological and economic uncertainty, it could be a green light for many to take a long-term long position on the BT share price with the stock at its lowest value in over a decade.
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