2019 has proved to be another tough year for holders of BT Group (LSE: BT-A) stock. Its share price may have recovered some ground in recent weeks as a no-deal Brexit in late October was averted, but the telecoms giant has still lost 18% of its value since the turn of January.
Fears over sagging revenues have continued to plague BT as the fanfare over chief executive Philip Jansen taking the reins in February has run out of steam. But judging from news late this week — and specifically Labour plans for the FTSE 100 firm should it win the general election — things could get really bloody for the share price in the final six or so weeks of the year.
In recent times, the Labour Party has made no secret of its intention to bring public utilities back under state control should it win any general election. The power and water providers like Centrica, National Grid and Severn Trent as well as postal giant Royal Mail are front and centre of Jeremy Corbyn’s plans, but the leader’s renationalisation aspirations have now fanned out and BT is in the crosshairs.
In an interview with BBC Radio 4’s Today programme on Friday, Labour’s shadow chancellor John McDonnell said that that Openreach and some other parts of BT would come under government control should his party win the general election on December 12.
Explaining the rationale behind the move, McDonnell laid into current plans to roll fibre broadband out across the country, with many parts of the UK still awaiting the necessary hardware for fast internet access. Under Labour plans, every British household and business premises would have access to full-fibre broadband by 2030 and at zero cost too.
What should you do?
Naturally this leads to big worries over what a Labour government would pay BT investors to compensate for the loss of the unit. And McDonnell did little to soothe these fears, advising that the exact fee would be worked out by Parliament at a later date, with stockholders to be remunerated with government bonds.
So what should BT shareholders make of this news? Well it’s critical to remember that the chances of Labour securing a parliamentary majority following next month’s ballot remains extremely remote, a scenario that’ll surely be needed for the party to get its renationalisation programme off the ground. Indeed, according to polling guru Sir John Curtice, the chances of a Labour-controlled House of Commons are “as close to zero as one can safely say.”
But that’s not to say that BT investors should totally pooh-pooh the possibility. Polling has become a notoriously tricky business, as the Brexit referendum and recent presidential and general elections in the US and UK have shown. I would be surprised but not shocked should Labour be handed control next month, a scenario that could decimate the BT share price.
So forget about the company’s dirt-cheap forward P/E ratio of 8.2 times and monster 8% dividend yield. Combined with all of BT’s other problems, it’s a share I won’t be touching with a bargepole.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019