The BT (LSE: BT) share price has had per week, as I imagine the youngsters are fond of claiming, after longtime companion Sky introduced it might be shifting some enterprise away to one of many new fibre children on the block. 

The shares fell 9% in a matter of hours and a cool £1bn in market cap was wiped off. The share price now sits at 138p. The quick however steep drop has taken the sting off what had been threatening to develop into a great yr for the world’s oldest communications firm. 

Did the market overreact right here? Or is that this a inventory to hold up the cellphone for? Let’s take a look. 

Battle strains

The current information is a type of ‘battle of the broadbands’ centred squarely on BT’s Openreach service. Openreach is the corporate’s fibre division, tasked with rolling out hyper-fast fibre broadband and the quickest web speeds going. 

Crucially, that is an unsaturated market with round half of UK households with out it put in. Development isn’t straightforward to come back by for telcos so this can be a key a part of the enterprise.

On the opposite aspect of the battle strains are ‘altnets’ – smaller, different suppliers of fibre broadband, the Davids to the BT Goliath. The most important of those altnets, CityFibre, signed a take care of Sky to offer fibre to its clients. This not solely threatens to steal enterprise from BT, however fierce competitors may drive down margins and have an effect on Openreach earnings too.

I’ll need to inject my very own expertise right here as I signed up with an altnet lately after shifting into a brand new place. I used to be a bit nervous signing up to an organization I’d by no means heard of. These worries swiftly fizzled away when the set up was organized inside a day, accomplished inside an hour, and each time I wanted to speak with somebody on the cellphone, I didn’t have to attend for 45 minutes. 

It didn’t really feel like 2020s Britain in any respect. If that’s what altnets are providing then I concern for the massive gamers that don’t provide it. In different phrases, I can see these altnets consuming BT’s lunch.

Purchase for the dividend?

And if I’m unimpressed with Openreach as a supply of development then it’s arduous to see BT as something aside from a secure dividend inventory. The agency pays a 5.92% yield, which in equity could be very excessive, the thirteenth largest payout on the FTSE 100. If I used to be withdrawing from a nest egg I’d take a flowery of that a lot of a yearly return and snap up the shares. 

With extra time to play with although I’ve to have a look at the expansion aspect of the equation and the share price has traded sideways for many years. 

Considerably extremely, I may have purchased the shares within the Eighties and bought them right this moment for a capital loss. Altogether, this isn’t a inventory I’m enthusiastic about even after the drop in share price.