UBS more cautious on BT Group PLC and TalkTalk Telecom Group PLC highlighting


The Swiss bank’s scribes have cut their target price for BT to 140p from 165p, and reiterated a ‘sell’ rating on the FTSE 100-listed stock

Analysts at UBS have turned more cautious on both blue-chip () and mid-cap () in a review of the UK telecoms sector, highlighting intensifying competition.

The Swiss bank’s scribes have cut their target price for BT to 140p from 165p, and reiterated a ‘sell’ rating on the FTSE 100-listed stock, with the shares currently trading at 154.90p, up 0.9%.

READ: BT, Vodafone and TalkTalk face “disruption” from new price war

For TalkTalk, the UBS analysts downgraded their rating to ‘sell’ from ‘neutral’, reducing their target price to 101p from 107p, with the FTSE 250-listed shares currently changing hands at 113.90p each, down 1.3%.

In their overview, the analysts said: “We think the UK communications market is at a crossroads with the introduction of End of Contract Notification for broadband customers from February 2020.”

They noted: “Ofcom is focused on narrowing the difference between front-book (promotional) and back-book pricing. On a best case, this could lead to increases in promotional prices and operators moving to in-contract, inflationary (CPI) price rises.

“However, we think it is more likely that operators become more promotional.”

The analysts pointed out that Vodafone PLC () has been taking notable broadband market share and they are wary that this could trigger a response by BT that could see competition spilling over into the mobile market – leading to downward pressure for the broader UK communications market.

They said, in their view, Vodafone’s actions over the coming months could therefore be a lead indicator of things to come.

Intensifying competition

The analysts also spotlighted press reports stating that Sky/ are in talks over a fibre joint venture/cable wholesale with a conclusion likely in the coming weeks.

They said: “We think a fibre JV could cover 7-10mln homes, be funded largely through debt and be off balance sheet. A deal would help accelerate growth for both parties, reduce broadband wholesale costs for Sky and capex for Virgin Media.”

The analysts said that, given the risks of intensifying competition, they have cut estimates for most of the operators to factor in limited UK growth over the next three years.

This has led them to cut BT’s target price and downgrade TalkTalk’s rating and target.

The analysts said they retained a ‘buy’ rating and 200p target price on Vodafone as the UK is modest in the context of the group but it is set to see accelerating growth.

Vodafone shares were up 1.2% at 152.14p.



Read MoreUBS more cautious on BT Group PLC and TalkTalk Telecom Group PLC highlighting

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