BT's Nimble Feet

It takes "nimble feet" to dance to a new tune, says Mike Verdin on Breakingviews.com. Yet telecoms giant BT once crippled by debts is proving remarkably agile.

According to BT, fourth quarter profit came in at the top end of forecasts, while the group promised higher dividends hiking its dividend payout ratio for the year to 57% of underlying earnings before goodwill and exceptional items from 50 one year ago. Moreover, BT's stock has outperformed its European peers by some 10% in the last 12 months, says Santosh Menon on Reuters.co.uk. It was the best performing blue chip across Europe in that time.

So how did BT profits impress the analysts? Because the group's performance was lifted almost entirely by its new wave business, which saw revenue hike to some £1.4bn during the last quarter, says Menon. BT was also lifted by a number of acquisitions.

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Yet there are a still many challenges which could "spoil the BT party", says Verdin. The dividend joy now shown by investors could fade should the earnings on which it is based fall. What's more, the rival's are catching up in the UK, which is eating into its "fast-shrivelling legacy business". And on the other end of the scale, despite the increase in competition, regulators may still complain that the rivals are not "eating BT's lunch" quite fast enough.

All in all, BT's immediate prospects are not a sure winner. Notably the group did not follow up its statement with a look at its future prospects. This omission in reference to future confidence "may be the better guide".