Sign up United Kingdom
Proactive Investors - Run By Investors For Investors

BT stands to gain as Virgin Media curtails network expansion, says Numis

Numis maintained its 'buy' rating and target price of 325p per share on BT
BT's Openreach arm plans to bring superfast broadband to 3mln premises by 2020

Virgin Media’s suggestion that it will curtail its network expansion is a “meaningful positive development” for rival BT Group PLC (LON:BT.A), analysts at Numis said on Friday.

In a call with investors after publishing its second-quarter results on Thursday, the parent company of Virgin Media, Liberty Global (NASDAQ:LBTYA), said the broadband operator added superfast connections to 118,000 UK premises in the period.

However, Liberty said the pace of Virgin Media’s network expansion would not accelerate going forward.

Numis reiterates 'buy' rating on BT

“This contrasts with what LBTY (Liberty Global) said only three months ago and it signals that VMED (Virgin Media) has curtailed its network expansion plan,” Numis said.

“In turn, this is a meaningful positive development for BT's investment proposition; we reiterate our ‘buy’ recommendation and our discounted cash flow-based target price of 325p per share.”

BT’s network division Openreach plans to upgrade the UK’s broadband infrastructure by replacing ageing copper lines with superfast fibre optics. The aim is to bring superfast broadband to three million premises by 2020.

READ: BT expects hit to Openreach earnings as it offers discounts for faster broadband

Virgin Media’s so-called ‘Project Lightning’, announced in February 2015, is targeting four million premises by 2020. In the first quarter, it brought superfast lightning connections to 111,000 properties, blaming the slow pace on heavy snowfall and shorter winter days.

Liberty said the additional 118,000 was a “steady pace” that is “going to continue”.

Doubts on Virgin Media hitting target 

Asked if Lightning's target of four million premises still stands, Liberty’s chief executive, Mike Fries, said:  "I am not going to give you long-term guidance whether it's three million or four million, except to say as long as you're getting good returns, it's smart use of capital.”

Since first announcing the programme, Virgin Media has built the network to 1.3mln premises.

Numis noted that Virgin Media’s build costs per property increased in the second quarter to £615-620 from the £575mln quoted in the third quarter of 2017.

The broker said its additional conclusion were: “(i) VMED has curtailed Project Lightning in spite of Ofcom and government actions and further plans to incentivise more investment in all-fibre infrastructure; (ii) the possibility to share ducts and poles with, say, TalkTalk/Infracapital did not dissuade VMED from curtailing Project Lightning; (iii) VMED does not feel the need to accelerate network build-out to mitigate the threat from all-fibre AltNets.”

View full BT.A profile View Profile

BT Group plc Timeline

Related Articles

August 19 2018
BATM's Networks & Cyber division returned to growth in 2017

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use