Is BT Group a 5G stock worth owning? Here’s what I think

first_img I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Zaven Boyrazian does not own shares in BT Group. 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. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! 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Zaven Boyrazian | Saturday, 19th December, 2020 | More on: BT-A Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee.center_img Over the past five years, shares in BT Group (LSE:BT.A) have not been performing very well. Can 5G change all that?BT is already heavily involved with bringing the new mobile network online around the UK. There are currently over 110 towns and cities with access to 5G, and the recent partnership with Belfast Harbour is only going to increase that figure.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Despite this good news, the BT share price is still nowhere near its high of nearly £5 almost five years ago. Will it ever recover?A 5G opportunity?If you aren’t fully aware of how large BT Group is, the telecoms infrastructure company owns and manages all of the UK’s core fixed network. In addition to that, it is also the largest broadband provider, serving 35% of the British population using one of its several brands – namely BT, EE, Plusnet, and Openreach.Just like it with 4G, BT is taking on the challenge of getting its infrastructure updated to support 5G-based communications. But this process is quite expensive and not going as smoothly as initially anticipated. For example, the government’s decision to limit Huawei’s involvement in developing 5G is estimated to cost BT an additional £500m.Despite these setbacks, 5G coverage is expanding outside of major cities. It certainly is an expensive process, but with most mobile companies’ piggy-backing off BT’s network, these expenses may be justified.BT Group has a serious debt problemWhile there are numerous reasons for BT’s poor performing stock price, the most prominent is its debt situation. Keeping up with costs for maintaining, improving, and running its communication network pushed management to borrow money. A lot of money.To me, BT is a classic case of a business being hellbent on growth, without realising it’s destroying shareholder value rather than creating it. Today, almost 70% of the firm’s capital structure is debt. The levels are so high that it owes more money than the total value of the company!Debt can be a powerful financing tool if used correctly. It’s a perfectly acceptable way of raising capital to invest in new projects. The problem is that these projects eventually need to make money, and in the case of BT, they are simply not earning enough.Over the last five years, BT’s profits have declined by 30%. Meanwhile, debt levels have been rising, and with it, interest payments. As of March 2020, 24% of underlying profits is being used to cover debt interest. It doesn’t help matters that previously deferred income taxes are now coming due, adding even more pressure to the bottom line.The bottom line – can 5G save BT Group?5G may rejuvenate BT Group. The network is up to 100 times faster than 4G, and a boost of this magnitude sounds quite enticing. So much so that it’s likely to attract many new customers to one of BT’s brands.However, the firm has over £27bn of long-term obligations to repay with interest. If 5G fails to attract enough new customers, then I fear that BT will continue its downward trend to insolvency.For that reason, it seems more like a gamble rather than an investment to me, so I won’t be buying any shares any time soon. See all posts by Zaven Boyrazian Our 6 ‘Best Buys Now’ Shares “This Stock Could Be Like Buying Amazon in 1997” Is BT Group a 5G stock worth owning? Here’s what I think Image source: Getty Images last_img read more