Source:
www.breakingviews.com
is Europe's leading financial commentary service.
BT has come a long way. Two years after its £6 billion (€9.6 billion) rescue rights issue, the UK telecom is throwing off cash again.
BT should generate about £1.8 billion of equity-free cashflow - the cash after interest and tax that is available for dividends or paying down debt - this year. And that makes a £16 billion market value look rather mean. After all, the cashflow yield of 11.2% compares with a telecoms sector average of 10%.
Investors seem concerned that BT's sales will fall and erode this. However, these concerns are starting to look overblown. BT's growth outlook, while dull, does not qualify as a disaster. What's more, there are levers that can be pulled to protect cashflow...
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