The BT (LSE: BT.A) share price was one of the big losers of the recent stock market crash. Shares in the telecoms giant plunged to a multi-year low of around 112p in the middle of March.
They continued to fall further in the next few weeks to just above 100p in the middle of May. Since then, shares in the company have remained under pressure.
However, despite this performance, the company’s underlying business seems to be holding up quite well. Revenue is projected to decline by just 5% to 6% in the current fiscal year.
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As such, now could be an excellent time for long-term investors to snap up the share while it trades at a depressed level.
BT share price value
In the past, I have advised readers to stay away from BT shares. The company’s large pension deficit, lack of growth and increasing debt burden, were all red flags in my opinion.
The company still has these problems, but management is taking action. What’s more, the shares are now trading at such a low level, they appear to offer a substantial margin of safety.
Indeed, the BT share price is currently dealing at a forward price-to-earnings (P/E) multiple of just 5.6, that’s around 50% below the group’s long-term average P/E of 10. These figures suggest that if the company can return to growth and rebuild investor confidence, the stock could double from current levels.
And it looks as if management is finally knuckling down to try and restore the group’s position as the UK’s foremost telecommunications provider. BT has accelerated its capital spending plans. It now intends to spend £12bn over the next 10 years upgrading the country’s internet infrastructure connecting 20m homes to its full-fibre network.
In recent years the company has been losing customers to competitors who have been investing billions to compete with BT in the fibre market.
Customer service initiatives
The company is also pursuing several customer service initiatives. These initiatives include returning to the high street in an attempt to rebuild trust with customers.
These actions might not produce an immediate financial return, but BT has a terrible reputation for customer service. This may be scaring customers away. By improving its reputation, more customers may be encouraged to switch to the business, which would be positive in the long term.
To fund these initiatives, and keep its debt under control, the company recently suspended its dividend. The BT share price did not react well to this announcement, but I think it was a necessary step.
By retaining cash for growth today, the company should be able to improve its long-term growth potential. Therefore, while the dividend announcement was disappointing, it may be a positive in the long run. By investing in the business today, BT may be able to pursue a more generous dividend policy in the future.
So overall, while the BT share price has been disappointing this year, the firm appears to have tremendous potential.
