BT Group PLC (LSE:BT.A) was reiterated as a 'sell' by UBS following its fourth-quarter results, with the bank counting off five underappreciated risks that could weigh on performance in the near term.
UBS analyst Polo Tang, who maintained his 12-month price target of 120p that implied a downside of 31.43% from the 175p share price at the start of the week, noted that while free cash flow guidance was held steady, this is based on an optimistic assumption that revenues will grow from the 2027 financial year.
BT seems to be hoping for competitive pressures to ease, the analyst said.
"With easing CPI-linked price rises, rising broadband infrastructure competition (the largest altnets are raising new financing and expanding their build targets), MVNOs taking share on mobile and legacy declines in Business, we think the next move on consensus estimates will be downwards," he said.
Rather than BT's suggestion last year that capex has peaked, Tang expects it to remain around £5 billion per year for the next two years as Openreach increases its fibre build target to 30 million homes.
The analyst said the market may be underestimating other key risks, including Sky shifting broadband volumes to CityFibre, which offers wholesale rates 20-30% below Openreach; and high line losses tied to TalkTalk subscriber declines and payment delays.
Another risk is the reported potential entry into the UK mobile market of Octopus Energy, potentially taking advantage of a wholesale must-offer as part of the Vodafone/Three UK merger remedies. "If this occurs, we are wary they could disrupt the UK market in the same way as the UK energy market," said Tang, as Octopus became numbe-one with a 24% market share in less than a decade.
The analyst also highlighted pressure on Openreach to cut wholesale prices, which could reduce EBITDA/FCF by up to £1.2 billion, and uncertainties linked to the planned PSTN switch-off in January 2027, which may increase customer churn.
UBS concluded that while guidance remains unchanged, downside risks to consensus estimates persist.