Private Investor: I'm sorry, British Telecom, your number is up
Saturday 26 March 2005
Click, click, brrr. I've finally hung up on
Click, click, brrr. I've finally hung up on British Telecom. Having bought its shares when they were privatised and at various points in between, I know that my losses on them exceed my profits, but, just for a change, I've decided to cut my losses. I cannot think of a single reason to hold let alone buy BT shares, except for the possibility that they might, in due course, become some sort of target for someone.
The trouble is that, although the company is a shadow of its former self, it is still big, with a market capitalisation of about £17 billion, even in its current becalmed condition. So any telecoms group or other buyer seeking to pick it up would need to have a certain amount of muscle. It was all so different once upon a time.
When I sold my shares at just below 200p last week, I shuddered at the memory of the peaks they scaled in the dotcom boom - £15 or so, I seem to recall, at their peak. When they went down to £8, when the bubble peaked, I bought some more, because they looked cheap. Of course, they only looked cheap in relation to their vastly inflated levels during that boom, but then I - and others - couldn't quite see that. Foolish indeed.
For me, it all went wrong when BT floated off its mobile arm, once called Cellnet, then MMO2 and now just O2. Remember Cellnet? That really was a business with a future: mobile telephony. BT had to sell it because it had racked up so much debt, not least through what it had to pay the Government for its 3G licence for, ahem, mobile telephony.
All BT had left was the fixed-line business, a load of phone boxes, inert domestic customers, and regulators that seemed to want to unbundle it out of existence and wouldn't even let it control its own "local loop". And this is on one of the most competitive markets going, with suppliers from Tesco to Wanadoo offering broadband for next to nothing.
BT is joining the fight, we know, and is well placed to win some customers, but the attrition of its old customer base looks set to continue. It would have all been very different if it had hung on to its mobile business, in which it would have maintained a hedge against the future.
Now, I see, O2 has a market capitalisation not that far behind BT - about £11bn. Admittedly this has been pumped up by a good deal of takeover talk, but it is quite remarkable how it has turned itself around. Last week's trading statement knocked 10 per cent off the shares, I admit, but there were hopeful signs alongside forecasts of lower growth and provisions for redundancies.
First, O2 is going to invest in extra staff in customer service, which is now the main focus, as telecoms focus on customer retention rather than acquisition. Secondly, rather more significantly, the German end of the business, long a source of misery and confusion, seems to be picking up subscribers.
O2 shares trade at the equivalent of 14 times likely earnings per share for the next financial year, and give a healthy dividend yield of 2.9 per cent. Which makes them not bad value, but not as good a bet as when I bought them at about half that level after the telecoms boom collapsed. So for me, O2 is a hold rather than a buy.
So what is a buy? Well, Serco, which I wrote about a couple of weeks ago. It has a finger in virtually every public service outsourcing pie from the London Docklands Light Railway to the Leicester Royal Infirmary. Indeed, it operates in markets in Europe, the Middle East and North America. Dividend policy is progressive (up 12 per cent last year). The only worry is gearing, at 70 per cent, a result of a capital restructuring a couple of years ago, but it is long debt at reasonable rates, so it should be manageable for such a fast-growing business.
I bought at 244p. That's down from its peaks of 600p a couple of years ago but, unlike with BT, I expect it will see those heights again before too long.
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Simon Read: Timeshare owners accuse Macdonald Resorts of land grab
Five Questions: Changes to car tax discs
How to save money: UK is crashing down the European league table for putting money away
A student's guide to financial survival: You don't have to drown in debt at university
Bargain Hunter: Win a new iPhone 6
- 1 Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
- 2 Stamford Hill council removes 'unacceptable' posters telling women which side of the road to walk down
- 3 Kim Kardashian 'nude pictures' leaked on 4chan weeks after Jennifer Lawrence 'The Fappening' scandal
- 4 Iranian blogger found guilty of insulting Prophet Mohammad on Facebook sentenced to death
- 5 New Tricks: Dennis Waterman to leave the show after a decade of crime-solving
Scottish independence referendum: A nation divided against itself
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Russia freezes Ukraine into submission: Kiev admits country doesn't have enough fuel for winter
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...
Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...
£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...
To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...
Day In a Page
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize