BT share price falls as Citi cuts rating to ‘neutral’

on Jul 6, 2015
Updated: Oct 21, 2019

Citi has cut its rating for BT Group Plc (LON:BT.A) from “buy” to “neutral”, even though it boosted its target price for the telco’s shares to 485p (up from 450p). The analysts based their decision on the regulatory risks that the company faces in relation to the £12.5-billion acquisition of mobile carrier EE.

The analysts noted that Ofcom’s desire to avoid re-monopolisation of the market could lead to more radical changes than the market expects and added that the next 12 months would see a high level of regulatory activity in UK telecoms.
“While we expect BT to ultimately get through with the EE deal closed and Openreach still attached, we believe that investors may be underestimating the potential impact of Ofcom’s Strategic Review,”the analysts said in a note, as quoted by Digital Look.
BT earlier this year reached an agreement with EE’s owners, Deutsche Telecom and Orange, to acquire Britain’s largest mobile operator. This raised concerns among BT rivals such as Vodafone Group Plc (LON:VOD) and TalkTalk, which urged Ofcom to impose tough concessions on the deal. This coincides with the launch of Ofcom’s once-in-a-decade review of the communications market. The watchdog has sent requests to BT rivals to submit views on the deal as part of the review.
While the regulatory uncertainty surrounding the deal has prompted Citi to reduce its rating for BT, the financial institution has bumped up its 2016 revenue forecast the telecoms giant by 7.5 percent. It also lifted the 2016 earnings estimate, excluding EE, to £6.28 billion.
In today’s trading, BT shares were down 0.9 percent at 449.75p, as of 10:44 BST. The stock has risen nearly 12 percent since the start of the year and the company’s market valuation currently stands at £37.5 billion.
As of 13:00 BST, Monday, 06 July, BT Group plc share price is 448.90p.

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