Can a new CEO reverse the BT share price slump?

BT Group CEO Philip Jansen blamed the slump in BT’s share price on short-term London investors in an interview with The Sunday Times. While BT shares are up year-to-date, they have been on a downward trend since the middle of April. Jansen is due to step down later this year, but can a successor boost confidence in BT shares?

• BT share price slump due to “short-term investors”, says outgoing CEO Philip Jansen.
• Hunt for new CEO in progress, while BT looks to axe 55,000 jobs.
• Rumours circulate of a potential takeover from Deutsche Telekom.

BT’s [BT-A.L] share price has rung up a near 11% gain so far this year. Yet despite the gains, BT shares have slipped over 7% since 14 April, while over the 12-month period the stock is down over 20%. Higher costs, reduced cash flow and a shrinking dividend have been eating away at investor confidence.

In an interview with the Sunday Times over the weekend, BT CEO Philip Jansen blamed the slump in the share price on “short term” London investors who “find it harder to look in the longer term”.

Jansen said short-term outlooks were always going to be a “challenge for BT when you’re investing in initiatives and infrastructure that takes 10 to 12 years to build and will be used for many, many decades”. For example, BT’s infrastructure arm Openreach, which has the goal of reaching 25 million homes with high-speed fibre optic broadband by the end of 2026, had connected 10.3 million homes at the last count.

But can a change at the top help convince investors to stick with BT shares, or will the current downward trend continue?

BT boss Jansen to hang-up on top job

Philip Jansen is to step down from running the telecoms provider later this year. In an update to the market last week, chairman Adam Crozier said that “all appropriate candidates” would be considered and word on Jansen’s replacement could be expected over the summer.

Along with rolling out fibre networks, Jansen’s time at the helm has seen BT’s shares lag, staff revolt and competition rise. Whoever takes over after Jansen will have to deal with a slew of challenges. At the top of the pile is costs.

In May, Jansen said that BT would trim its workforce by 55,000 jobs by the end of the decade in the hope of achieving a “significantly reduced cost base”. In its most recent set of results, BT said its cost-transformation programme was on track with gross annualised cost savings of £2.1bn since April 2020, against a £3bn target.

The BT boss's resignation comes as speculation mounts over a potential German takeover of the telecoms group.

BT was said to be on “high alert” over the possibility that major shareholder Deutsche Telekom [DTE.DE] could spearhead a takeover bid, according to a report in The Daily Telegraph. The paper reported that BT has been in talks with Goldman Sachs [GS] and advisory firm Robey Warshaw to create a defence around a takeover bid.

Is there upside in BT’s share price?

Running a telecoms company is a tough gig. Even with a cost-reduction programme, rolling out fibre optics and 5G connectivity takes investment; then there is the cost to maintain the network.

There have been some positive signs of progress. Adjusted EBITDA came in at £7.9bn in the year ending 31 March, up 5% year-on-year, with growth in consumer and Openreach operations offsetting declines. Revenue was down 1% at £20.7bn.

Soaring inflation led to workers striking over pay last year, with BT’s earnings impacted as a result. Less industrial action and more focus on profitability should help whoever replaces Jansen.

In June, analysts at UBS downgraded the stock from ‘neutral’ to ‘sell’, slashing their price target to 120p from 140p. The analysts assume that BT will have to half its dividend to cover costs at BT Sport.

"We think the market has underestimated the impact of rising interest rates and accounting changes at BT Sport that impacts free cash flow," the analysts said.

BT will update the market with its first quarter trading statement on 27 July.

BT shares have a median 12-month price target of 192.5p from analysts tracking the stock. Hitting this would see a 54.9% upside on Friday’s close.