The purpose of this report is to describe and explain the share price movement of British Telecom in a period beginning 3rd of February to 13th of March. In this report, background information about the British Telecom will be shown. This includes a short history of the company, the products they sell, its size and location. The second part of the report will present a description of the share price movement of British Telecom within the period it was monitored. The third part of the report will talk about a comparison between the British Telecom, Vodafone Group Plc and the FTSE share price movement. The fourth part of the report will discuss the reasons for the share price movement trend of the British Telecom. Finally, the report will end with a conclusion that shows that main points in the report.
British Telecom: Recent Performance
The British Telecom, known as the BT Group plc, was established as early as 1846 but was formed officially in 1980. British Telecom is the major telecommunications services provider in the UK and is located in London, England (BT.com, 2014). The company also operates in more than 170 countries around the world (Thomson Reuters, 2014). The company provides different services such as broadband, fixed-line service, mobile communications, television and IT-related services. As a telecommunications provider in the UK, most of the consumers of British Telecom are consumers, small to medium-sized businesses and the public (BT.com, 2014). In the UK and in other parts of the globe, the British Telecom sells its services and products to other communications providers. Also, British Telecom is in the business of supplying networked information technology services to different multinational companies, local businesses, and government organizations (Thomson Reuters, 2014). Based on reports, the British Telecom’s profit and sales increased because of the increase in demand for broadband services and the sports television services. In addition, the number of customers that are disconnecting lines from British Telecom has declined by more than half compared last year (BBC News, 2014).
British Telecom Share Price Movement
The figure above shows the share price movement of British Telecom in a six-week time period starting from the 3rd of February to the 13th of March. It is seen that the share prices of British Telecom started to rise up after a small decline in the 5th of February. Starting from the 7th of February to the 17th of February, sharp increases of the share prices for British Telecom were seen. The next five days was consistently flat apart from a sudden increase again on the 25th of February to 69.4 pence. After this rise, a small decline was seen and then the increase and decrease trend began from the 24th of February to the 9th of March where a sharp decline was seen as share prices dropped to 66 pence. On the 13th of March, another sharp decline happened and the share prices declined to 64 pence.
A comparison between FTSE 100 and British Telecom share price
The FTSE 100 movement was also monitored from the 3rd of February to the 13th of March. Starting on the 5th of February, the share price movement trend was moving upward until it reached the highest share price on the 25th of February at 6862.70 pence. After reaching this peak, a sharp decline followed on the 4th of March with a decrease of about 1000 pence. In the 5th of March the share price rose again but this was followed by a consistent decline until the 13th of March. In comparing the FTSE 100 and British Telecom share prices, it is seen that both the share prices of FTSE 100 and British Telecom rose between the 24th and 25th of February and declined sharply on the 13th of March.
A comparison between British Telecom and Vodafone Group plc share price
The Vodafone Group plc is another mobile communications company in the UK (Google Finance, 2014). The Vodafone’s share price only started to increase on the 20th of February and reached its peak on the 25th of February with 249.44 pence. This is similar with British Telecom which also reached its peak on the same day. The sharp decline of share prices for Vodafone began on the 5th of March while for British Telecom, it started on the 7th of March. Both companies are similar in having a downward trend in share prices beginning the 13th of March.
Reasons for British Telecom’s Share Price Movement
There are reasons why the share price movement of British Telecom followed an inconsistent increase and decrease trend. This may be caused by some factors in the business environment such as national and world economy, the rise of competition, and the launch of new products. One possible reason why the share price movement of British Telecom began to rise from the 7th of February to the 17th of February is the launch of a new product from the company which is the Home SmartPhone S device (Kedia, 2014). The launch of new products and services from a company always increases the confidence of the investors on the company’s performance. This could be why for the next ten days following the first day of launch of the British Telecom’s new Home SmartPhone S device, the share price movement of increased.
The peak of the share price movement trend for British Telecom happened on the 25th of February. This could be because on that day, an announcement was made by the company about its new partnership and five year engagement with the BroadSoft Inc. British Telecom will be the only distributor of BroadSoft BroadCloud communications platform in the UK (Broadsoft Inc., 2014). This means an expansion on the communications related services being provided by the company. Because of this long-term agreement with BroadSoft, the confidence of the investors may have also increased as any partnership that is meant to expand the company’s services is a sign that the company is stable and is doing good.
On the 13th of March, another sharp decline happened on the company’s share prices. This could be because the issue on British Telecom’s £4.6 billion has been brought out again by the company (Stevens, 2011). Even if the overall financial position of British Telecom is doing well, the issue on debt always scares investors and makes them doubt about the safety of their investments. British Telecom’s big debt is a threat to the company investors because they believe that debts can cause the company to fall down. Also, debt causes investors to lose confidence on the company.
It is seen that both the share prices of FTSE 100 and British Telecom rose on the 25th of February which means that some positive changes in the UK economy may have caused the share prices of the company to increase. According to Chang (2014), the British economy has been showing signs of improvement. Even though the economy is not considered to have fully recovered from the global financial crisis in 2008, the share price levels are increasing but not that consistently.
To conclude, the share price movement trend for British Telecom is in an upward-downward trend throughout the whole six weeks, beginning the 3rd of February to the 13th of March. The share price movement of British Telecom is similar to the FTSE 100 share prices which reached the peak of increase on the 25th of February. This may be caused by some factors such as the five year engagement of British Telecom with BroadSoft Inc. This means that the company’s services will expand which may increase the confidence of the investors on the company’s financial position. It could also be an effect of the British Telecom’s new product launched in the market which is the Home SmartPhone S device. Finally, it could be because the British economy has been showing signs of improvement and recovery from the financial crisis many years ago.
BBC News. (2014). BT revenues up on demand for broadband and sports TV. http://www.bbc.com/news/business-25975695
Broadsoft Inc. (2014). BT bolsters hosted communications offering by partnering with Broadsoft . http://www.marketwired.com/press-release/bt-bolsters-hosted-communications-offering-by-partnering-with-broadsoft-nasdaq-bsft-1882287.htm
BT.com. (2014). The BT story. http://www.btplc.com/Thegroup/Ourcompany/TheBTstory/index.htm
Chang, H. (2014). This is no recovery, this is a bubble – And it will burst. http://www.theguardian.com/commentisfree/2014/feb/24/recovery-bubble-crash-uk-us-investors
Google Finance. (2014). Vodafone group plc. https://www.google.co.uk/finance?q=LON:VOD
Kedia, M. (2014). BT launches Android-powered home SmartPhone S with nuisance call blocker. http://www.techienews.co.uk/976008/bt-launches-android-powered-home-smartphone-s-nuisance-call-blocker/
Stevens, M. (2011). Is BT Group plc dependent on debt?. http://www.fool.co.uk/investing/2014/03/11/is-bt-group-plc-dependent-on-debt/?source=uptyholnk3030001
Thomson Reuters. (2014). BT Group PLC (BT.L). http://www.reuters.com/finance/stocks/companyProfile?symbol=BT.L