Shares in BT Group (LON:BT.A) rose in London yesterday, outperforming the broader UK market, as Jefferies turned bullish on the former telecoms monopoly. Citywire reports that the analysts argue that the departure of chief executive Gavin Patterson signals a change in priorities and a better relationship with industry regulator Ofcom.
BT’s share price rose in the previous session, adding 2.71 percent to close at 214.30p. The stock outperformed the broader London market, with the benchmark FTSE 100 index ending the session 0.31 percent higher at 7,627.40 points. The telco’s shares remain down by more than a quarter over the past year.
Jefferies lifts stance on BT
Jefferies lifted its rating on the former telecoms monopoly from ‘hold’ to ‘buy’ yesterday, while also hiking its price target on the shares from 215p to 245p. Citywire quoted the broker’s analyst Jerry Dellis as commenting that CEO Gavin Patterson’s upcoming departure could ‘ease regulatory bottlenecks’ as by BT’s own admission it was in need of change and this ‘puts Ofcom under pressure to respond constructively’ to concerns about how BT and Openreach are implementing legal separation.
The blue-chip telco announced earlier this month that Patterson is set to step down later this year. The telco expects to have a successor in place during the second half of the year.
Dividend cut threat remains
Dellis, however, also noted that the risk to BT’s dividend was ‘linked to regulatory reward’ and ‘ruling out a dividend cut would be unwise’.
“Cutting dividend per share to deliver a robust regulatory settlement […] could make BT a great deal more investable. But it would be illogical – and is not necessary – for BT to cut the dividend before negotiating an acceptable settlement,” the analyst pointed out.