Friday tips round-up: Aviva, BT Group

Market thinking on Aviva’s takeover of Friends Life appears to have turned for the better, after the shares’ initial negative reaction. The former stands to gain the most from the combination. Certainly, last year’s figures show nearly all the company’s key metrics heading in the right direction. Excess cash-flow rose 65% to £692m ahead of analysts’ projections. The company’s boss, Mark Wilson, is squeezing down hard on costs, generating cost savings.

The fund management side can also be improved upon, Wilson believes, with additional synergies available from cross-selling Aviva brands. The insurer also boosted its total dividend by 30% to 18.1p – for a dividend yield of over 3%. However, there is scope for it to increase sharply when the deal goes through. “Buy, the Friends Life deal looks like an increasingly good one; the cash is piling up, which augurs well for dividend growth,” The Times’s Tempus says.

BT’s Openreach is the country’s main voice and data network. Since its inception in 2006, when Ofcom forced the telecoms group to give other carriers access to its network, broadband penetration in Great Britain has risen to the highest among the European Union’s major economies. However, competitors such as TalkTalk are unimpressed, arguing that service is poor and more investment is needed.

Should Openreach be made independent? There are previous examples of regulators forcibly asking incumbent operators to let go of their network, as occurred with National Grid. Nonetheless, a new management team could also be more ambitious and stretch the balance sheet the Financial Times’s Lex column writes.