UBS downgrades BT on increasing competition

UBS downgraded BT Group to ‘sell’ from ‘neutral’ with an unchanged 430p price target, saying the risk/reward profile was unattractive.

The bank said risks from increasing competition have been underestimated.

“Our estimates are broadly in line with consensus and assume a continuation of the current benign competitive environment. However, should competition intensify we see downside to 305p.”

UBS said it sees a risk of increasing competition that could lead to long-term EBITDA for BT being £1.25bn per annum lower on a downside scenario.

As far as mobile is concerned, the Swiss bank noted Sky is set to launch a mobile service later this year, adding that depending on the remedies from the Hutchison/O2 merger, there could also be a new entrant such as Iliad.

In addition, it argued the potential merger between Vodafone and Liberty Global would hurt BT wholesale revenues initially.

It also said the longer-term impact from Virgin Media's footprint expansion with Project Lightning has been underestimated.

At 1222 GMT, BT shares were down 0.7% to 447.45p.