BT plans £2bn share buy-back

is set to announce a £2bn-plus share buy-back at its 2006-07 results on May 17, according to people familiar with the matter.
The move should enable Sir Christopher Bland, who retires as chairman of Britain’s leading telecoms group in September, to go out with “a bang” at his last presentation of BT’s full-year results, analysts said. BT declined to comment.

The company has been enjoying a resurgence over the past year under the leadership of Sir Christopher and Ben Verwaayen, chief executive.
While some of its European peers, such as , have struggled, BT has reported four consecutive quarters of year-on-year growth in earnings before interest, tax, depreciation and amortisation.
BT’s shares closed at 316.

75p on Friday, up 1p. They have risen 48 per cent over the past year.
BT has been studying the case for increasing its gearing to enhance returns to shareholders, and some analysts predict that on May 17 it will raise its net debt target from £8bn to £10bn.

Michael Williams, analyst at who has a “buy” rating on BT, said it could announce a £2bn-plus buy-back.
He highlighted how Sir Christopher, shortly after becoming BT chairman in 2001, asked shareholders to support a £5.9bn “rescue rights issue” because the group had debt of almost £30bn.

“BT is likely to announce plans to return a chunk of this capital to shareholders on May 17, reinforcing confidence in the future.” Christian Maher, analyst at Investec Securities who also has a “buy” rating on BT, said it could raise its gearing by £3bn to cover a £2bn buy-back and £1bn of deals.
Mr Williams said BT, which has a BBB+ rating, should hold debt in its Openreach subsidiary rather than at group level, which could lower its financing costs.

Openreach enables BT’s rivals to gain access to its fixed-line network and is more akin to a utility than a telecoms company because of the regularity of its cash flows, he said.
Rating agencies support a BBB+ rating for a utility with net debt of 5-6 times earnings before interest, tax, depreciation and amortisation, compared with 1.5-2.

5 times for a telecoms company, added Mr Williams.
BT has been considering pushing its debt into Openreach, but people familiar with the situation played down the prospect of an announcement on May 17.