Analysts at Citi have cut their price target for BT Group PLC (LSE:BT.A) to 130p from 185p and reiterated a 'neutral' rating on the UK telecoms giant after updating their model for the company post-Q2 results and to reflect the deconsolidation of BT Sports and salary increase proposals.
The US bank's analysts said: "CPI-indexed pricing mechanism continue to drive strong ARPU growth in Consumer and Openreach, which we believe will stay as a key feature also for FY24.
"However, with Enterprise/GS topline under pressure and inflation driving up opex, the improvement in topline growth will only translate to a modest YoY EBITDA growth for FY24 on a l-f-l basis.
"This, together with higher tax/interest cash leakage, leaves our FY24 normalized FCF forecast down from £1.32bn in FY23 to around £1bn for coming years."
They concluded: "After special items and share buybacks, we do not expect BT’s dividend to be covered. But we do not see imminent dividend risk given the leverage headroom."