BT Group PLC (LSE:BT.A), the FTSE 100 telecoms company, rose almost 3% to 227.5p after JP Morgan argued the stock is entering the next leg of a re-rating that has already seen it double from its 2024 lows, reiterating its 'overweight' rating on the shares.
Analyst Akhil Dattani at JP Morgan said the coming months should ease the key concerns that have kept many investors on the sidelines, centring on competition from alternative network providers, known as altnets, the credibility of management's cash flow targets, and a sizeable pension deficit.
On cash generation, JPM expects the financial year ending March 2027 to deliver 30% growth in equity free cash flow (EFCF), a measure of cash available to shareholders after debt costs and capital investment, marking the first meaningful inflexion after six years of broadly flat performance.
That would, for the first time in a decade, leave BT's dividend covered by its cash generation, a threshold the broker regards as significant.
JP Morgan expressed hope that BT would seize the moment to unveil a new dividend policy explicitly linked to its EFCF growth outlook, noting that doubling the dividend by March 2030 would deliver an 8% yield for investors while still leaving room to reduce debt.
On the competitive threat, the broker said its analysis suggests the worst of the altnet pressure on Openreach, BT's nationwide fibre network, is now behind the company, with line losses expected to improve steadily from here.
Despite the rally from 2024 lows, JPM argued BT remains cheap, screening at a 15% EFCF yield on its March 2030 estimates.
BT remains the most heavily debated telecoms stock in Europe, the broker acknowledged, but argued the weight of evidence is shifting in the bull case's favour.