European telecom stocks like BT Group PLC (LSE:BT.A) have been caught up in growing fears over the threat posed by satellite broadband, but UBS believes the market has become too pessimistic, arguing that the financial impact on the sector is likely to be limited for several years.
Analyst Dhruva Kusa Shah said the recent sell-off reflected concerns that low-Earth orbit satellite operators, led by SpaceX's (NASDAQ:SPCX) Starlink, could erode the dominance of traditional fixed-line and mobile networks.
However, he argued that investors were overestimating both the pace and scale of disruption.
"Recent share price weakness reflects concerns around the impact of LEO satellites," Shah said, but added that he viewed the earnings impact as "limited near term", with meaningful competitive pressure unlikely before the second half of 2027.
Instead, the UBS analyst said the market had become fixated on a long-term threat that remained uncertain.
"The more material strategic risk lies in satellite operators potentially expanding into mobile via MVNOs, spectrum purchases, or MNO acquisitions," he said, rather than satellite technology replacing terrestrial networks outright.
Satellite connectivity was argued to be more likely to complement existing mobile infrastructure than replace it, particularly in areas with poor coverage.
While maintaining a cautious stance on parts of the sector, some operators are seen as better placed than others.
UBS favours Orange, arguing the French telecoms group was relatively insulated thanks to its strong fibre network and converged customer base. By contrast, BT Group PLC (LSE:BT.A) and Vodafone Group PLC (LSE:VOD) remain among its least preferred names because of greater exposure to the UK market.
Overall, the analyst said the recent decline in telecom valuations had run ahead of any likely impact on company earnings, leaving the sector open to a reassessment if fears over satellite competition prove overdone.
