Ofcom tabled proposals today to cap the amount the telecoms giant can charge for the use of its underground cables, and analysts say that although the threat to revenues can’t yet be quantified, £700m of income is at risk.
The news comes just one day after FE Trustnet warned of the threat to equity income funds through their holdings in regulation-dependent industries.
Invesco Perpetual Income has 5.06 per cent in BT, its fourth-largest holding, while Woodford’s Invesco Perpetual High Income fund has 4.75 per cent invested, its sixth-largest holding.
Ten funds in the IMA universe have more than 5 per cent in BT, half of which are in the equity income sector, including FE Alpha Manager Leigh Harrison’s £1.28bn Threadneedle UK Equity Income fund.
The fund with the largest overweight position is the £741.5m Invesco Perpetual UK Growth, managed by Martin Walker, with 7.28 per cent in the company.
Funds with more than 5 per cent in BT Group
| Fund | % of fund in BT |
| Invesco Perp UK Growth | 7.28 |
| Invesco Perp Childrens | 7.07 |
| Artemis Capital | 6.6 |
| Threadneedle UK Equity Alpha Income | 6.5 |
| Threadneedle UK Equity Income (retail only) | 5.8 |
| Invesco Perp UK Strategic Income | 5.29 |
| Invesco Perp UK Aggressive | 5.26 |
| Threadneedle UK Select | 5.2 |
| Threadneedle UK Equity Income | 5.1 |
| Invesco Perp Income | 5.06 |
Source: FE Analytics
BT’s dividend has fallen recently and its current yield of 3.7 per cent is around two-thirds of its value in 2010, but the stock remains popular in the sector. FE Trustnet research shows that out of 102 funds in IMA UK Equity Income, 29 hold the company in their top-10.
Last month the company pledged to boost its dividend by 10 to 15 per cent over each of the next three years, with a 12 per cent year-on-year increase for 2012.
However, the proposal by Ofcom to limit charges for its leased lines to 6.5 per cent above inflation will damage revenues that were already falling and bring into question whether similar increases are sustainable.
The company took a £286m hit last year from increased regulation on mobile termination rates, while a consultation period on the latest proposals finishes at the end of August.
Shares dipped slightly on the news yesterday before recovering this morning, but with a couple of months to go until the details are finalised, the stock price could fluctuate further in the short-term.
The move by Ofcom also underlines the impact regulation can have on the sector, as highlighted yesterday, with authorities under pressure to lower consumer costs in a recessionary environment.