Will BT shares be buoyed by Q3 20/21 earnings

• Third quarter (Q3) 2020/21 financial results due to be released tomorrow (3 February 2020)
• Q3 earnings expected to have declined by 5.7%
• Virgin Media 5G snub and legal claims hit BT hard
• However, profit guidance rises due to fibre rollout and ‘unbreakable’ ties with EE

BT Group PLC (BT.L) is set to publish its latest Q3 2020/21 financial results on 3 February, with significant interest in the figures to inform the potential upside in the BT share price.

BT shares appear to have plateaued around the 125p-127p mark in recent days, which marks a 20p decline from its New Year high of 146.85p on 7 January. Nevertheless, it’s still hovering around 25-27p higher than its share price in autumn 2020. The consensus is that Q3 2020/21 revenues will have declined approximately 5.7%, based on predictions using the BT Group earnings forecast.

Virgin Media turn to Vodafone for its new 5G mobile network

The BT Group was dealt a hammer blow in recent weeks when Virgin Media shunned it in favour of launching its new 5G service using the Vodafone (VOD.L) mobile network. It’s the first sign of Virgin Media cutting its ties with BT’s EE network, with Virgin Media anticipating all of its mobile users to be operational on the Vodafone network by early 2022.

Virgin Media is also seeking competition approval from the Competition and Markets Authority (CMA) for a £31-billion merger with Telefonica-owned O2, which could create a major telecoms competitor for BT.

Overcharging claims and BT Openreach employee strikes the cause of recent downturn

The primary cause of the fall in the BT share price since early January has been two-fold. Firstly, it was revealed that the BT Group is facing legal claims of up to £600 million for overcharging approximately 2.3 million landline customers.

In addition, BT’s Openreach employees threatened to go on strike over low wages, causing shares to plunge by as much as 8%. Openreach remains a vital part of BT’s short-to-medium-term strategy, given the UK government’s goal to provide full-fibre connectivity to all households by 2025, with Openreach investing in more engineers to ramp up installations nationwide. BT's fibre-to-the-premises (FTTP) network has doubled the number of household orders, which has led to management upping the BT Group's full-year profit guidance from £7.3 billion to £7.5 billion.

Will BT’s ‘unbreakable’ home internet deal with EE and investment in new recruits bring positivity?

With Openreach likely to be at the heart of the UK’s fibre connectivity ambitions for years to come, there is also good news regarding a new ‘unbreakable’ home internet service, powered in tandem by BT and EE. BT’s new Halo 3+ package will include a ‘Hybrid Connect’ function, which will instantly connect to EE’s 4G mobile network if the BT smart hub detects a wired broadband outage. This hybrid technology is a UK first and will offer greater reliability for users during and after the Covid-19 pandemic.

In addition, the BT Group is set to recruit 400 new graduates and apprentices throughout 2021, spanning engineering, cybersecurity, and customer science specialisms, in another move that’s viewed as a vote of confidence from the company’s upper echelons.

Providing the Q3 2020/21 financial results are in line with industry forecasts, it would appear there is more than enough potential in BT’s Openreach and EE partnership to offer an upside for BT shares in H1 2021.