BT has been given a clear signal by the stock market that it should not attempt to transform itself into a broadcaster.
The telco saw its share price drop steadily earlier this week, after company chairman Sir Christopher Bland gave an interview suggesting that BT was considering a move into broadcasting, and might even begin creating its own programmes. City analysts also reacted badly to the news, with JP Morgan lowering its rating for BT's shares.
Faced with this negative reaction, Bland is thought to have backtracked on the broadcasting strategy. He is understood to have told a US conference on Wednesday that -- while BT's network might be used to transmit television content -- the company was not planning to transform itself into a media player.
And, once news of this apparent u-turn reached investors, BT's shares recovered.
Having fallen from 265p on Monday morning to below 245p in trading on Wednesday afternoon, BT staged a rally on Thursday morning when they peaked at 254p. By Friday lunchtime, the telco's shares were hovering around the 252p mark.
Their failure to recover all the lost ground may be related to the fact that some city figures were unimpressed that Bland made his comments before incoming chief executive Ben Verwaayen has had a chance to give his views on BT's future strategy.
The feeling in City circles is that rather than considering a move into broadcasting -- which could be both risky and expensive -- BT should concentrate on its core UK market. When it announced that it was downgrading BT's shares from "buy" to "market perform", JP Morgan said that "BT's focus on cash generation is threatened by an apparent desire to pursue growth avenues," the US investment bank said.
Just before Bland's comments were made public the Sunday Telegraph advised its readers to buy BT shares, on the back of recent cost cuts and a renewed emphasis on marketing and customer service.
By becoming a content provider, BT might be in a better position to compete with rivals such as ntl and Telewest -- who offer their subscribers a triple cocktail of telephony, Internet access and television.
The word from the City, though, is that the company should concentrate on its existing business while it formulates a proper medium-to-long term strategy. In these difficult times for the IT sector, sitting tight and making money is no bad thing.
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