The BT share price: I think this is one of the best stocks in the FTSE 100

I’ll be the first to admit I’ve been somewhat critical about the BT (LSE: BT.A) share price in the past.

I believed the FTSE 100 company was struggling for direction in the highly competitive UK telecoms market. Management’s decision to enter the pay-tv market and spend billions on football broadcasting rights also seemed to be unwise. Certainly considering its high level of debt and terrible customer service reputation. 

However, while I still believe the business faces significant challenges, I think its outlook is steadily improving. With this being the case, I think the BT share price has become one of the best opportunities in the FTSE 100. 

FTSE 100 investment

There are a handful of reasons why I think the company’s outlook is improving. First off, management has changed direction.

Rather than focusing on growth, the business now seems to be doubling down on improving its existing offer. BT is spending billions over the next few years boosting its broadband network. The organisation has also invested in its store network and customer service. These are all part of management’s goal to improve the company’s relationship with customers.

At the same time, the group has been removing unnecessary layers of management. This should help streamline the enterprise and help it adapt better and move faster to changing conditions in the telecoms market. 

Debt is also starting to come down. According to the company’s latest trading update, BT’s net debt as of 31 December was £17.3bn, down from £18.2bn the same date the prior year. 

BT share price risks 

Unfortunately, the lower level of borrowing came at a cost. The firm didn’t pay a dividend last year. The money saved reduced net debt and some was reinvested back into the business. Therefore, it seems unlikely  the company will be able to maintain this level of debt reduction. I think that’s a big risk to the BT share price outlook. 

Also, while BT has been investing more in its infrastructure over the past two months, it isn’t alone. Competitors have been doing the same. Firms such as CityFibre and Virgin Media have also been spending big sums to boost their connectivity and attract customers. BT can’t afford to take it easy. 

Then there’s the risk of regulatory measures to consider. Regulators have threatened BT with action if the corporation doesn’t invest more in its network. This is something the company can’t control. If regulators ever decided to take action, the BT share price would undoubtedly suffer. 

Still, at current levels, shares in the telecommunications giant are changing hands at a multiple of around eight times forward earnings. That’s compared to its five-year average multiple, which sits in the mid-teens range.

On this basis, I reckon the FTSE 100 stock looks too cheap to pass up. So, while the business does face plenty of risks, I’d buy the stock today based on its valuation and turnaround potential.