Anyone who thought BT Group PLC (LSE:BT.A) had turned a corner might want to think again.
Analysts at Citi have warned that the telecoms giant could be heading into a tougher patch, just as the shares have shown some strength.
Citi, which has a 'sell' rating on BT, has set out a six-point checklist ahead of the company's full-year results on 22 May.
Top of its worry list is Openreach, the BT division that owns and operates the broadband network most homes and businesses rely on.
The US bank expects Openreach to start losing revenue from next year, and says that decline could continue for the rest of the decade.
The issue is the rise of so-called "altnets", smaller, independent fibre broadband providers that have been popping up all over the country. As more customers move to these rival networks, BT risks losing a steady stream of income from its core infrastructure.
While Citi acknowledges that analysts in the Square Mile have become more realistic about BT’s prospects for 2025 and 2026, it still sees room for disappointment over the medium term.
With the share price having recovered some ground recently, the risk of a setback is higher.
As a result, Citi has placed BT on what it calls a "negative catalyst watch" for the next 30 days.
In simple terms, it thinks something (possibly disappointing results or a downbeat outlook) could trigger the next move lower.
For private investors, the takeaway is straightforward. BT’s investment case hangs heavily on whether it can stem broadband customer losses and maintain its cash flow while it rolls out new fibre connections.
If Openreach revenue really does start sliding and cannot be offset elsewhere, the pressure on profits and dividends could intensify.
The 22 May results are shaping up to be a critical moment for Britain’s former telecoms monopoly.