BT loses more credibility in strategy switch

BT is considering the sale of its 31% stake in Tech Mahindra, software services firm listed in India, on the grounds that ownership no longer fits its long term strategy, according to the Financial Times.

Long suffering investors in the UK's incumbent are probably surprised to hear there is a strategy, its execution has been so poor. At the end of July, new CEO Ian Livingston had the unenviable task of delivering a set of very disappointing results which resulted in BT's share price falling 12% in day.

Former CEO, Ben Verwaayenl clearly had a good grasp of the principal of quitting while ahead: overall, BT's share price is around half of its peak a year ago. Put another way, as the FT pointed out, it has under-performed France Telecom by 41%, Deutsche Telekom by 40% and Telefónica by 36%. Ouch.

Perhaps the most worrying aspect is that the company's Global Services unit failed to perform as well as it was expected to with a profit margin of just 9.5% - and it is arguably the key component of BT's future hopes.

Now it seems BT is keen to sell all or a big chunk of its stake in the Tech Mahindra joint venture, which is thought to have a market capitalisation of about €1.49 billion. BT accounts for about two-thirds of the company's €634.9 million annual income. The Indian conglomerate, Mahindra & Mahindra, owns some 41% of the stock.

The JV specialises in services for the telecoms sector, a rapidly growing market, and has become India's sixth largest software exporter by growing at 30% for the last three years.

BT needs the cash (and there won't be any shortage of interested buyers) and to be free to focus on its core activities. It had better.