Results from Virgin Media owner Liberty Global showed BT Group PLC (LON:BT.A) holding its own against the interloper, as it muscles in on BT's market.
Broker Haitong notes that in 2016, Virgin Media extended its network reach by around 444,000 premises, a number that only describes the number of additional residences that could take Virgin's services.
Over the same period, the number of BT Openreach lines being subscribed for reduced by 73,000; however, the number rose by 50,000 in the final quarter – a period in which Virgin media's network reach grew by around 197,000.
Under “Project Lighting”, Virgin Media's network extension programme, the broadband services provider earmarked around £3bn to be spent between 2015 and 2019 to expand its network by around four million premises.
Haitong thinks Liberty Global PLC (NASDAQ:LBTYA) clearly believes it can keep growing “value space” organically, and as such is probably not in a hurry to deal any more deals with mobile phone networks operator Vodafone Group PLC (LON:VOD).
Questioned at an analyst coverage whether Liberty was considering taking over Vodafone, the company's chief executive, Mike Fries, said Liberty had “nothing but steady growth ahead of it; no massive disruption, no gotchas anywhere, no falling knives”, and whereas Vodafone needs to define its strategy for tackling convergence in the rest of their markets.
“They are a mobile-only player just about everywhere in Europe other than now Holland and Germany and Spain… Our strategy is to have a mobile product that complements a growing, robust, broadband and entertainment and fixed voice business,”Fries said.
Haitong rates BT as a 'buy', and has ascribed a fair value of 445p to it, compared to its current price of 313p.
It is neutral on Vodafone, with a fair value calculation of 200p, just a few pence above its current level.
US broker Jefferies, meanwhile, has slashed its price target for BT from 400p to 325p following the telecoms giant's recent profits warning.
The price target is driven by a £300mln reduction in long-run normalised free cash flow to £3.1bn. “A higher Mar17 pension deficit estimate (from £6.7bn post-tax to £8.5bn) does the rest,” the broker said, as it stuck with its 'hold' recommendation.
There is limited visibility on a return to free cash flow growth, in the view of Jefferies, and without it the dividend may need to be capped at around 18p, which still offers a juicy yield of more than 5%.