Berenberg upgrades BT to 'buy' but lowers target price

Berenberg said its revised target price on BT, down from 320p to 310p, represented a 33% upside and even though it was "slightly below 2018/19 consensus", its analysts believe the valuation was "sufficiently attractive to turn positive now".

Carl Murdock-Smith and his team of analysts said that by the time the 2019-20 fiscal year rolled around, infrastructure investment, the end of public sector headwinds, remedial action to fix its Italian operations and scope for outperformance on EE synergies would coalesce to create growth in revenue, EBITDA and normalised FCF over at BT.

Berenberg also noted that in the long-term, BT was quite unlike most telecoms companies as it would actually be a beneficiary if real interest rates increase, given that its pension deficit would shrink.

"BT has faced tough financial drags in recent regulatory reviews. We believe the extent to which this is due to Ofcom’s cost attribution review is underappreciated," Berenberg's analysts noted, but this was before Ofcom released its Wholesale Local Access review on Friday morning.

As of 1120 GMT, BT shares had picked up 4.48% to 242.75p, helped also higher after Ofcom on Friday revealed that it has moderated its approach on the price controls on Openreach for access to the fibre broadband network. The original proposal mooted a charge of £11.23, but this has changed to £11.92 a potential net improvement of £80m over four years.