The last time the BT Group (LSE:BT.A) share price was trading at £5 was almost 25 years ago. And although it did get quite close in 2016, this telecommunication enterprise has struggled to deliver sustained capital gains, seemingly stuck between 100p and 200p.

However, if analysts’ projections are correct, the business could be set to escape this valley, climbing potentially as high as 299p by this time next year, according to the most optimistic forecasts. That’s obviously far from guaranteed. But instead of around £3, what would it take for the shares to climb to £5?

The path to a 160% return

Reaching 500p’s no easy feat. That would require the current market-cap of £19.4bn to reach roughly £50bn which for such a debt-ridden business with stagnant growth isn’t likely to happen anytime soon. However, for long-term investors willing to wait several years, there are some levers management can pull to potentially deliver such gains.

Today, BT Group has two massive financial headaches – its debt and its pension deficit. To be fair, some progress has been made in chipping away at its outstanding loans since 2023. But there’s still around £23bn of borrowings & equivalents on the balance sheet, with interest gobbling up just shy £1bn of free cash flow each year.

It’s a similar story with the group’s multi-billion-pound pension deficit. This too has improvement lately, but there’s still a £4.1bn deficit that resulted in £800m contribution payments.

If BT Group shares are to once again reach £5, both of these liabilities will need to be fixed, freeing up around £1.8bn of free cash flow in the process.

Combining this with the planned £3bn annual cost savings expected to be delivered by 2029, and the resulting profit expansion could send BT’s operating earnings flying from today’s £2.3bn base, even if revenue growth remains elusive. It might even trigger a re-rating from investors that grants BT shares a justified premium valuation, pushing the stock to £5 a share.

Taking a step back

BT certainly seems to hold tremendous potential if it can lift its balance sheet out of crippling debt. But that’s currently quite a big ‘if’. Even with the planned cost savings, paying down its loans could take several years before any meaningful progress is made.

Management could accelerate this process by raising money from shareholders. But the resulting equity dilution would make reaching £5 even harder. Alternatively, it could look to dispose of non-core infrastructure assets. But that could undermine its position in an increasingly competitive market.

The point is, there’s no easy solution. And even if management perfectly executes its current strategy, secures new customers through fibre rollout, and meaningfully expands profit margins, it could be several years at best before a £5 BT share price seems likely.

There may be better opportunities to consider elsewhere.