HSBC has repeated its positive stance on under-pressure telecoms giant BT Group PLC (LON:BT.A) following a round-table discussion with its chief executive, Gavin Patterson.
Analysts at the bank repeated a ‘buy’ rating and 425p price target on the FTSE 100-listed stock, which offers around 38% upside potential.
In mid-morning trading today, BT shares were up 0.9%, or 2.65p at 309.45p, having found a level above 300p a share following a 20% slump by the stock at the end of last month after revealing a £500mln write-downs related to an accounting scandal at its Italian business.
READ: Italy overshadows BT results …
In a note to clients, the HSBC analysts pointed out that Patterson confirmed that a strategic review of BT’s Global Services division was underway as “its returns and cash conversion are not sustainable and options range from a complete disposal through to a country-by-country repositioning”.
The analysts added: “Investors’ main focus was on the risk of repeating issues with public sector contracts, where Mr Patterson sought to assure that the new outlook was suitably prudent.”
They said: “We remain concerned that an increased number of local tenders may require more staff, which in turn pressures profitability, but the addition of mobile should provide an opportunity for new business.”.
The analysts noted that Patterson also said discussions with regulator Ofcom over the separation of its broadband infrastructure unit, Openreach are ongoing, with BT having already pressed ahead with a series of reforms.