BT Group Delivers During This Quarter; Union Pressures for Wage Increases Continue; Maintaining FVE

Lots of moving parts in BT Group half-year results. While financial performance was in line with company-provided consensus, shares are declining 6% at the time of the writing. We believe this is mainly the result of the Federal Reserve's 75 basis points increase in interest rates yesterday, with an indication that rates might peak at a higher level than expected. The British Pound has declined more than 2% against the U.S. dollar in the past 24 hours as a result. We believe BT share price is more affected than other U.K. equities given it operates in leveraged and capital-intensive industry. However, we are pleased with how fundamentals have performed, with a 60 basis points EBITDA margin expansion driven by satisfactory performance in the consumer division and Openreach. We are maintaining our GBX 230 fair value estimate, with the shares trading in deep value territory and our forecasts being more conservative than consensus.