BT Group (LON:BT) cancelled their dividend on Thursday as the telecoms group announced an accelerated investment programme amid the COVID-19 crisis.
BT said they would not pay a dividend until 2022 as they invested in the adoption of 5G and increased the rollout of Fibre internet.
The market did not take the announcement well and BT shares traded as low as 101p in early trade on Thursday, down over 10%, before recovering.
Notwithstanding the scrapping of the dividend until 2022, BT posted disappointing full year earnings as adjusted EBITDA fell 3% to £7.9bn. Revenue also fell 3%, but this was broadly inline with expectations.
“BT had a positive year delivering results in line with expectations and completing our £1.6bn phase 1 transformation programme, one year ahead of schedule,” said Philip Jansen, Chief Executive
“Covid-19 has changed everybody’s world and I am immensely proud of how BT has responded to the challenges the Covid-19 crisis has presented. Our strong and resilient networks, both fixed and mobile, have proved critical to the continuing functioning of the UK economy, providing unrivalled connectivity and services for the nation.”
“Of course, Covid-19 is affecting our business, but the full impact will only become clearer as the economic consequences unfold over the next 12 months. Due to Covid-19, BT is not providing guidance for 2020/21, at this time.”
“BT has the best network infrastructure in the UK. We have the leading 4G network and are rapidly expanding our leadership position in 5G, that today covers over 80 towns and cities. We have the largest and most extensive fixed network and are leading the UK on the next generation Fibre-to-the-Premises (FTTP) network where we now pass 2.6 million premises.”
“Today we are announcing a rapid acceleration of our FTTP build with a target of 20 million premises passed by the mid- to late-2020s, including a significant build in rural areas.”
Jansen continued to explain the decision to cut the dividend was part of a broader investment plan that involved the roll out of 5G.
“In order to deal with the potential consequences of Covid-19, allow us to invest in FTTP and 5G, and to fund the major 5-year modernisation programme, we have also taken the difficult decision to suspend the dividend until 2022 and re-base thereafter,” Jansen said.
“These decisions, particularly on the dividend, network investment and transformation are key to underpinning BT’s investment case; driving network strength, competitive strength and financial strength, providing more clarity to the market, and driving long-term value for shareholders. I am confident that these decisions position us really positively for the future.”
The difficultly in coming to the decision to cut the dividend was reiterated the the BT Chairmen who said BT realised the “importance of dividends to our shareholders” who will now not see any income from their investment in BT until 2022.
