BT shares surged on Monday following Economic Times reports Indian conglomerate Reliance Industries was alignment and offer for the London-Listed telecoms group.
The BT share price hit 167.3 pence on a Monday morning, before falling as the session progressed.
BT showed signs of recovery earlier this month by releasing half-year results highlighting the impact of cost savings on profitability.
Adjusted earnings per share rose 7% to 10.2p and adjusted profit after tax also rose 7% to £ 1,014 million.
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The jump in profitability came even though revenues only rose 1% to £ 10.3 billion. It is this stable income that attracts Reliance, as BT is still grappling with pension commitments.
Reliance was recently outbid by a PE group for Dutch unit T-Mobile and Reliance is reportedly considering BT’s Openreach rollout after BT ruled out a joint venture.
“It says a lot about the changing dynamics of the global economy that an Indian company like the conglomerate Reliance Industries may be about to launch a bid for control of UK telecommunications giant BT,” said Russ Mold, managing director. investments at AJ Bell.
“The reports come after a private equity offer for Telecom Italia that suggested the entire industry was at stake.”
“Telecommunications stocks were as unloved as a cold call on Christmas Day, and that is reflected in depressed valuations.”
“Reliance itself was the subject of an outbid on a deal to control a Dutch unit of T-Mobile as recently as September, and it could have rivals for its apparent interest in BT. The French billionaire Patrik Drahi, founder of Altice, has continued to develop a position in BT and Deutsche Telekom already has a significant stake.
“It will be interesting in this context to see if this supposed move by Reliance flushes out other parties and starts a bidding war for BT.”
“You can see why BT might generate interest. Despite its substantial pension liabilities and debts and uncertain track record, it holds a near-monopoly position on the UK’s broadband network. And, despite all of its recent woes, BT has the capacity to generate substantial cash flow. “