BT Group is still a ‘sell'

UBS maintained its 'sell' rating on BT Group, setting a 135p price target that implies a 36% downside, due to intensifying competition from UK 'altnet' broadband providers. These altnets are aggressively undercutting prices by up to 30% while offering superior speeds, pressuring BT's subscriber growth and pricing power. Although BT's cost savings are stabilizing EBITDA, UBS deems its recent £4/month price increase risky given rivals' lack of matching, anticipating lower revenue per user and ongoing market share erosion, exacerbated by partnerships like Sky/CityFibre.

Analysis

UBS has reiterated a 'sell' rating on BT Group PLC, establishing a 135p price target that signifies a potential 36% downside from the prevailing 212p share price. The bank's bearish outlook is primarily driven by intensifying competition from 'altnet' broadband providers, which are undercutting established operators by up to 30% while offering faster speeds. This has led to a market-wide reduction in headline prices by £1 to £4 per month since April. Consequently, BT's recent unilateral £4 monthly price increase is viewed as a risky move that could negatively impact revenue per user, even as promotional activities support new signups. While BT's cost-saving measures are currently offsetting top-line weakness and stabilizing EBITDA, UBS identifies significant near-term risks. These include mounting competitive pressure from the Sky/CityFibre partnership and the likelihood that recent improvements in Openreach line losses may be temporary, pointing to sustained pressure on both subscriber growth and pricing.

Key Decisions for Investors

• Given the UBS price target implies a 36% downside, investors holding BT.A should reassess their positions due to the significant risk of capital depreciation from intensifying competition.
• Potential investors should exercise caution, as the aggressive pricing from altnets and the risk to BT's revenue per user suggest a challenging outlook for shareholder returns at the current valuation.
• Monitor BT's upcoming subscriber figures and average revenue per user (ARPU) metrics closely for tangible evidence of the competitive impact, as these will be leading indicators of whether UBS's bearish thesis is materializing.