Huawei and below expectation results hit BT shares

BT (LSE: BT) today warned the UK government’s decision to restrict Huawei’s access to 5G networks would cost it £500m over the next five years – and maybe more as that was just an initial calculation.

At the same time as that bombshell, the share price was also hit by results were “slightly below our expectations”. The bad news combined to send the shares down over 7%. The market overall fell – with the FTSE down by nearly 1.4% as a result of increased fears over the Coronavirus.

The third-quarter results showed a 3% decline in revenue and a 4% fall in core earnings. In the three months to the end of December, revenue fell to £5.78bn from £5.98bn, while adjusted earnings before interest, tax, depreciation and amortisation declined to £1.98bn from £2.06bn. The results reflect the impact of regulation and competition.

Chief executive Philip Jansen said the company remains on track to meet its outlook for the full year despite delivering results slightly below its expectations for the third quarter.

“We continue to invest in the business. During the quarter we launched Halo, the UK’s ultimate converged plan, which will give homes and businesses the best connection and service. We’ve continued to use our national scale and local presence across the UK to provide customers with the best possible experience, for example by meeting our promise to answer all customer calls in the UK and Ireland and bringing BT sales and service back to the high street in nearly 500 BT/EE stores.”

BT’s shares had been doing well after the risks of nationalisation under a Jeremy Corbyn government receded following December’s general election.

For income investors, the shares are looking very cheap and the dividend is very high but likely at risk of being cut. Telecoms operator Vodafone (LSE: VOD) took an axe to its dividend last year.

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