UBS reckons BT Group PLC (LON:BT.A) could take a £500mln earnings hit if the Citizens Advice Bureau’s ‘super-complaint’ is upheld by regulators.
At the end of September, the CAB filed the complaint and called on the Competition and Markets Authority to tackle the so-called “loyalty penalty”.
The charity criticised companies in a number of industries for taking advantage of customers, who it claims are paying “far more for a service” than new customers.
READ: Credit Suisse downgrades AA on ‘super-complaint’ fears
“We see increased focus on broadband pricing in the UK market, with the CAB filing a super complaint, and Ofcom set to propose/implement greater ‘Customer Engagement’ measures, with mandatory end of contract notifications the likely outcome,” read a note to clients on Monday.
“We see a £500mln potential risk to annual revenues/EBITDA should the entire out of contract back book be re-priced to the current in-contract tariffs. This would impact FCF by c15%.”
As a result, UBS analysts expect customer losses to increase and average revenue per user to decrease.
“FY21 revenue [forecasts] fall 1% (by £230mln), with EBITDA -1.4% (by £103mln), as we see strong cost cutting offsetting somewhat.”
UBS lowered its price target slightly to 250p (from 260p), although it kept its ‘equal weight’ rating in place.
There was some better news from Barclays, which hiked its price target up to 260p (from 210p) following news that Sky/TalkTalk have signed long-term wholesale deals with BT’s Openreach division.
BT shares were down 0.6% to 250.2p on Monday morning.