If Bt has bought back 2million 5 thousand shares to day. How come it shows on trades as a sell?

A recovery play here but not sure when.

Will the gap be filled?

Louis Capital note today:
"**** A GOOD DAY TO TRY TO PUT ALL THE BAD NEWS OUT BUT IT IS NOT EASY TO HIDE THE FACTS - While all the headlines this morning concentrated on the problems in Italy and the multi-year accounting irregularities, the company pushed out an even more important development - the UK PROFIT WARNING AND WEAKNESS ACROSS THE BOARD in international markets.

**** BT CONFIRMS A SLOWDOWN IN THE UK AND CONFIRMS NO PICK UP IN PUBLIC-SECTOR CONTRACTS IN CONTRAST TO PREVIOUS Q4's - The company also confirms that they are seeing weaker pipeline for business in the UK, that budgets are being squeezed due to Brexit and that public sector contracts are ending sooner than expected. However the profit warning is not restricted to the UK business only.

**** THIS IS A PROFIT WARNING ACROSS THE BOARD - BT confirms that they are seeing similar pressure in the international corporate market. This does not bode well for the "Global Services" division which was recovering and implies pressures across the board and across divisions. As such today's event is not really concentrated in Italy - Italy is just a small sideshow in a business which is under pressure all over.

**** NEXT EVENT : I EXPECT TO SEE AN ADJUSTMENT DOWNWARDS IN DIVIDEND EXPECTATIONS. The weakening fundamental health of this company is not in line with a 10%pa dividend increase policy. Watch this space - a cut in dividend or at best a flat dividend will be the next major newsflow.

**** THE MAIN FUNDAMENTAL RISK IS STILL TO MATERIALIZE : INVESTMENTS IN CONTENT CANNOT BE JUSTIFIED and will lead to earning dilution and a decrease in Return in Capital Employed (ROCE) and this will become more visible with the upcoming auction of the European Champions League in 2017. I calculate the breakeven point of a BT TV sports customer at nearly £32/month. They will never recoup that cost and hence this is purely a very expensive retention tool which will fail and lead to earning dilution. The fact that BT has now started to charge nominal prices between £3.5-£7.5/month for BT sports does not change the facts that they are still 5-10x away from break even point.

**** TRADING STRATEGY : STOCK CLOSING ON MY PT OF 300p. However, the fundamentals have now changed and hence I have to look at my valuation models again. Under no circumstances will I be a BUYER of the stock at these levels as any dead cat bounce over the next few sessions will be short-lived. Numbers have to come down and with 15 BUYS and only 3 SELLS the analyst community is still to turn. The majority still hold the wrong conclusion that investment in content is beneficial for BT, so we still need to see the BULLS turn before we even get close to a BUYING opportunity."

Haitong Broker note:
"BT Group / BT/A LN - Bitter disappointment, but stock has overreacted
Under review
Today BT [BT/A LN, 313p*, Under Review] warned about (i) BT Italy and (ii) the outlook for UK public sector and international corporate markets, which is a bitter disappointment to us. More so because, we think, these two issues are far from the most consequential drivers of BT’s share price at current levels: we think regulation and the pension deficit remain much more important determinants of BT’s net present value.

During the call, BT said that prospects for the rest of the group (c.80% of total EBITDA-capex) remain good, but management should have brought forward 3Q FY17 results (out this Friday) to talk much more expansively about this. Not doing so, we think, was a mistake.

Based on our experience of BT and our work on the company to date, we think management has chosen to reflect the causes of today’s profit warning onto revised FY17 and FY18 guidance, but not the continuing good performance of other BT divisions (e.g. BT Consumer, EE and Openreach). As ever, BT always errs heavily on the side of caution.

We think this also because, despite today’s profit warning, BT has not changed dividend guidance of ‘at least 10% growth’ in FY17 and again in FY18.

We need BT to report full 3Q FY17 results this Friday before we settle on our new numbers, fair value and hence recommendation. Therefore we place both under review until then."

Sounds a very reasonable assessment from Haitong.

Although the update on the Italian business grabbed the headlines, the division only contributed around 1 percent of the group's core earnings for the year to the end of last March.

"We expect the market to react negatively to the deterioration in trading in public sector and international corporate," analysts at Citi said.

"In addition BT risks a credibility hit that this protracted and significant distortion to its accounts in Italy has happened at all." Citi has a "Buy" recommendation on the stock.

That gap is looming!

BT European chief to resign over Italian scandal

The gap filled and then lower would not be a surprise from here.

Citigroup Buy 301.65 460.00 425.00 Retains

Barclays Capital Overweight 301.65 525.00 525.00 Reiterates

Beaufort Securities Buy 305.80 440.00 360.00 Retains

RBC note today:
"We see BT's shock announcement as an opportunity to buy. BT Italia will be resolved, the public sector could be partly timing due to government changes, and the rest of the business is in good shape. BT is strategically very well positioned, is deleveraging (despite growing dividends) and can resolve the regulatory overhang.

(1) BT Italia will ultimately be resolved. KPMG has almost finished its review and the issues do not affect other Global Services units. The £175m hit on EBITDA of c.£65m is unlikely to leave BT with a £100m loss each year as FY17 and FY18 include cost write-backs and BT will seek to turn the unit around.
2) Public sector could be partly timing. Management said the issues were probably due to the economy and Brexit, with departments not spending their budgets before their year ends, less decentralisation of budgets, and smaller renewals of big contracts. The comments appear to echo what other public-sector-facing business have said, eg, Carillion: "the pace of new order intake has slowed... due in part to the changes within UK Government Departments following the EU referendum result". We agree with our colleagues in business services that these changes in government and the uncertainty of Brexit appear to be delayed decision making rather than a permanent reduction in order flow.
3) Rest of the business appears OK. BT reports 3Q on Friday, but the rest of the business appears in decent health with strong mobile demand in corporate and SME (virgin territory to retail-focused EE), whole and ventures seeing an improving underlying trend and Openreach recording the highest-ever fibre broadband adds.

We use a discounted cash flow (DCF) and multiple-based SOTP to arrive at our ex-dividend price target of 475p. Our weighted cost of capital is 7.5% for BT with modest perpetual growth assumptions (1.0%). Our price target supports our Outperform rating.

Louis Capital still negative:
"**** PT CUT TO 250P - SELL INTO ANY DEAD CAT BOUNCE THIS WEEK - I am cutting my PT on BT from 300p to 250p this morning. The main reason is that the stock movement yesterday was mainly driven by weakening fundamentals on the "top line" only. The impact of a worsening "cost" situation driven by the high uneconomical "investment in content" is still not visible to the market and is not factored in the shares, in my view. As we move into 2017, and with the first round of bidding for European Champions League due in March 2017, I expect the focus to move more towards the analysis of the "returns" on these investments. With SKY likely to be emboldened by Fox's intended acquisition and with possibly a greater budget, BT will need to bid even more than the £897m bid of 3 years ago, in order to win the rights, in my view.
**** UNACHIEVABLE BREAK-EVEN POINT IMPLIES THAT CONTENT INVESTMENT REMAINS A BOTTOMLESS PIT FOR BT - I calculate the break-even point of a BT TV sports customer at nearly £31.8/month. The argument that the break-even point of £31.8/m will decline in time as more subscribers join BT TV’s platform is absolutely valid but how much will the cost of acquiring the sports right inflate by? In the last EPL auction BT had to pay a premium of 30% over the price they had paid 3 years earlier. The European Championship/Europa league auctions are coming up and all indications are that the next EPL auctions are likely to increase significantly in value. That leaves us with two conclusions:
** 1) BT has to continue to charge premium prices for its broadband service vis-à-vis Vodafone and others operators in order to underwrite its content (TV) costs. However with Vodafone now undercutting their broadband cost as they do not need to subsidize their mobile customers, BT has no option but to reduce prices or face losing customers once the contract terms end. In either case it will be difficult to see a longer term winning scenario or
** 2) BT refuses to renew or bid for any further football rights. In such a scenario BT will be back to square one, i.e. where it was before the launch of BT Sport and therefore will face the potential loss of its broadband customers especially at a time when other operators such as Virgin Media have upgraded the reach and the quality of their network. No winning scenario here either.
**** THE CONCLUSION IS CLEAR : Under the current pricing model and given the competitors positioning it is hard to justify how BT can make a long term economic return by investing in inflating sports rights.
**** NEXT A DIVIDEND CUT: THE 15-20% DOWNGRADE IN FCF (£550m-£700m downgrade) removes all the safety net that BT had. Previously we had calculated that after Pension payments and share buy-backs BT will have around £2.3bn of FCF for next year. With dividends guided to increase by 10% per annum, by FY18/19 this implies a payment of £1.65bn. That leaves an FCF post FY18/19 of £2.3bn - £1.65bn = £650m for spectrum license costs, increases in unexpected content costs, etc. Today's downgrade of £550-700m removes all that safety net and hence any rise in content costs in the upcoming auctions will pressure the dividend from an organic perspective. Sure - BT can tap the debt markets to pay the dividend - but I don't think that investors will reward the company for that strategy! SELL."

Morgan Stanley Overweight 307.25 490.00 400.00 Reiterates

Interims tomorrow - should be quite interesting.....

Certainly worth keeping an eye on this one for a possible entry point next week.

StockMarketWire.com
BT Group's reports good progress across most of the business in the third quarter but admits this has been overshadowed by the results of investigation into its Italian operations and its outlook.

Reported revenue rose 32%, and underlying revenue excluding transit adjusted for the acquisition of EE was down 1.5%.

Reported earnings per share fell 59% and adjusted earnings per share fell 24%.

Adjusted EBITDA rose by 18% to £1,870m with underlying EBITDA adjusted for the acquisition of EE down 8%.

Total adjustments relating to the investigation of its Italian business amount to £268m for prior year errors, for which it has revised prior periods, and a specific item charge of £245m for changes in accounting estimates (£145m in Q2 and £100m in Q3).

Net cash inflow from operating activities totalled £1,515m, down £178m and normalised free cash flow of £606m was down £298m.

Outlook: 2016-17 underlying revenue1 broadly flat, EBITDA of c.£7.6bn, normalised free cash flow3 of c.£2.5bn.

2017/18 underlying revenue1 broadly flat, EBITDA broadly flat, normalised free cash flow of £3.0bn - £3.2bn.

Chief executive Gavin Patterson said: "The good progress we're making across most of the business has unfortunately been overshadowed by the results of our investigation into our Italian operations and our outlook.

"We've undertaken extensive investigations into our Italian business, including an independent review by KPMG, and I am deeply disappointed with the unacceptable practices by some that we've found.

"This has no place at BT, and it undermines the good work we're doing elsewhere in the Group. We are committed to ensuring the highest standards across the whole of BT.

"We face a more challenging outlook in the UK public sector and international corporate markets but we've seen record growth at EE, strong momentum in Consumer, and our highest ever fibre net connections in Openreach.

"Customer experience remains a top priority. EE is now answering 100% of its customers' calls in the UK and Ireland.

"In Openreach, missed appointments have halved year on year.

"We'll continue to invest to ensure our service levels improve and that our customers see the benefit.

"We are pushing ahead with reforms at Openreach, particularly on governance and customer service and continue to believe an agreement can be reached with Ofcom on its Digital Communications Review.

"We think these changes address Ofcom's concerns and can form the basis for a fair, proportionate and sustainable settlement."

Not looking to clever is my conclusion so avoid for the moment.

Skinny's fish is currently looking like shark bait!

Talking of Skinny, where is he?