Telecoms watchdog Ofcom needs BT Group PLC (LON:BT.A) more than ever now that Sky PLC (LON:SKY) has opted not to spend money building Britain’s fibre infrastructure.
That’s the view of Haitong Research, which has reiterated its ‘buy’ recommendation for the telecoms leviathan.
The broker says the company, effectively bequeathed a monopoly when it was privatised, has been well managed for years and its free cash flow growth prospects remain attractive, particularly in view of the still strong demand for fibre and fixed line/mobile contract bundles.
BT, through its partnership with EE, has the most substantial network owner economics, which should prove an advantage in a still very price-competitive market.
“We continue to believe Ofcom will let Openreach’s wholesale prices rise to incentivise the build-out of new fibre infrastructure (even though SKY does not want to help) and BT to invest more in service quality,” Haitong said.
“We think customer take-up of fibre broadband will keep growing apace,” it added.
Being an ex-nationalised industry that looked after its employees, BT’s pension deficit has long been a concern for the market but Haitong argues that the deficit is a key reason why Ofcom does not want to split Openreach from the group, “so worrying about a split and the pension deficit is nonsensical”.
Shares in BT currently trade at 371p; Haitong thinks they are worth 560p.