UBS remains firmly bearish on BT Group PLC (LSE:BT.A), warning that the market continues to underestimate the mounting pressures facing its Openreach business.
In a note published this week, analysts reiterated their ‘sell’ rating and trimmed their price target to 120p, suggesting nearly 30% downside from current levels.
At the heart of UBS’s concerns is Openreach’s exposure to struggling wholesale customers.
A dismal set of results from TalkTalk, Openreach’s second-largest external client, has sharpened those fears.
TalkTalk’s revenues dropped 7.2% in its last financial year, and it lost more than 400,000 broadband customers, a decline UBS says is likely to weigh directly on Openreach line volumes.
UBS estimates Openreach is now shedding broadband lines at a pace of more than 800,000 per year.
Even with inflation-linked price increases, that rate of decline implies Openreach revenue could start falling in the 2026 financial year.
BT shares have rallied in recent months, buoyed in part by sector-wide re-ratings and Bharti’s conversion of a stake previously held by Altice. But UBS argues that the supportive tailwinds may not last.
Without faster cost-cutting or a sharp improvement in Openreach’s fortunes, BT’s free cash flow outlook remains under pressure.