BT facing more broadband infrastructure competition, Barclays says

BT could face increased competition for providing broadband infrastructure from wholesale-only providers, Barclays said as it reduced its rating on BT shares to ‘equal weight’.

As well as cutting BT’s rating from ‘overweight’ the Barclays analysts reduced their price target by 20% to 280p and revised down their forecasts for profit in 2019 and 2020.

There have been regular announcements about alternative providers building fiber to the home (FTTH) but so far little has been done, Barclays analysts said. But after talking to Open Fiber, which is building a fiber-optic network in Italy, the analysts believe there are opportunities for similar operations to do well in the UK.

Broadband service providers, regulators and mobile network operators would like to see the model succeed, Barclays said. As an incumbent BT finds it hard to find the right wholesale price or accelerate FTTH build. Yet BT faces a risk from alternative infrastructure providers if it does not accelerate FTTH.

The Barclays analysts said: “We see ‘wholesale-only’ providers potentially shifting the risk-reward profile for FTTH investment in Europe, principally in markets such as the UK and Germany where there is a heavy reliance on the incumbent for wholesale access, and a lack of existing FTTH infrastructure … As such, an acceleration of FTTH investment looks to us all but inevitable.”