BT share price: Company’s earnings to come under pressure amid intensifying competition

on Feb 15, 2016
Updated: Oct 21, 2019

BT Group Plc’s (LON:BT.A) earnings will come under significant pressure, with its dominance in broadband, fixed line and mobile, set to be challenged amid intensifying competition in the telecoms sector, according to UBS.

Analysts at the Swiss investment bank said in a recent report that the £12.5-billion takeover of EE would result in cost savings of £540 million a year for BT, but also noted that the threat of increasing competition had been “underestimated”. The report highlighted Sky Plc’s (LON:SKY) plans to launch a quad play offering later this year, estimating that the move could cost BT as much as £585 million in annual earnings. The analysts pointed out that about 52 percent of Sky’s current TV customers also buy a broadband package from the satellite TV operator.

UBS also said that telecoms entrepreneur Xavier Neil, the owner of French network Iliad, is looking at entering the UK market, which represented another potential threat for the British telco. Iliadhas already gained 25 percent of the French telecoms market by offering cheaper prices than its rivals.
UBS also touched upon the future of BT’s infrastructure business, Openreach, which is currently being reviewed by Ofcom. The bank opined that a full-separation of the unit was unlikely, but added that the industry regulator would impose tougher regulations on the unit, such as price controls on its wholesale fibre network.
In today’s trading, BT shares were up 1.1 percent at 452.95p, as of 10:28 GMT. The stock has fallen just over four percent since the start of the year and the company’s market capitalisation currently stands at £45.1 billion.
The 22 analysts offering 12-month price targets for BT have a median target of 530.00p, with a high estimate of 600.00p and a low estimate of 240.00p. As of February 13, 2016, the consensus forecast amongst 25 polled investment analysts covering BT had it that investors should hold their position in the company. The same consensus estimate has been maintained since November 27, 2015, when the sentiment of investment analysts deteriorated from “outperform”.
As of 11:14 GMT, Monday, 15 February, BT Group plc share price is 453.45p.