BT Group 'looks cheap' but more clarity needed, says Morgan Stanley

The bank pointed out that the shares are down around 50% from their highs in late 2015 and, marking to market BT's divisions, with a 7.5% premium to regulated asset value for Openreach and 12 times operating free cash flow for the remaining business units, could drive a share price of 340p. This would offer roughly 35% upside potential.

"However, the timing on such value creation is very uncertain," Morgan stanley said in the note to clients on Thursday, expressing caution about stepping in too early.

"We expect the share price to continue to remain subdued until the issues around capex, content costs, pension and dividend are further clarified."

MS estimates a pre-tax pension deficit of £13bn when BT publishes its triennial review valuation in the first half of next year.

On creeping content costs, analysts expect the outcome of the Premier League rights auction in early 2018 to results in 25% inflation for an equivalent package of rights today, which takes BT's annual costs for the top-flight UK football to £400m and including European football to £794m in the year to March 2020.

On capex and the timing around fibre investments, Ofcom is due to update the market on regulation in the first quarter of 2018, which is likely to hold back Openreach's final decision on investments.