Fewer hang ups for BT

Signs of genuine optimism have emerged in the BT share price of late. Long discounted by regulatory concerns, the threat of windfall taxes from an incoming Labour government, and finally the swirling uncertainty over the proposed merger with MCI of the US, the company has powered out of the 340p-380p price range in recent months.

In the space of two weeks the dust has cleared further: Labour may not tax the company's "windfall" gains as much as previously feared (though with all Labour policies, this one is subject to change without notice), and the MCI deal may be allowed to proceed without much regulator interference.

Is the optimism overdone? Perhaps, but no more than the pessimism was overdone before. This week the shares shot ahead another 20p to close at 442p, a 10 per cent rise from 1 January. Positive sentiment has been fuelled by strong buy signals from a variety of brokers.

The problem for the investor looking for further growth in the stock is that BT's future has so many elements to it, and weighing them up can be tricky. Starting at the simple end, the proposed pounds 13bn merger with MCI, which will not proceed until the US competition authorities pronounce on it in the autumn, is central to BT's plans. Concert currently has 25 joint ventures on the go, and 44 partnerships and distribution agreements. Each has positive and negative points, and clearly not all the partnerships will succeed.

The goal of a combined BT-MCI is also simple: to dominate the pounds 120bn European telecoms market, which does not get deregulated fully until next year. However complications could arise when deregulation begins to take shape. Markets that have had one state-owned provider since the dawn of telephony are not suddenly going to embrace competition. Teething problems are expected.

The upshot is that BT remains the kind of share that is hard to exclude from a portfolio: very solid earnings, with the possibility of major gains from a volatile market. The risk of splashing out large sums on the MCI deal, which has been concerning a few institutions of late, remains, as does the possibility of a stitch-up in the European telecoms market. But the shares have long been assessed on the downsides, and the upsides are only just appearing.

RICHARD HALSTEAD