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Telecoms at a crossroads: BT faces aggressive broadband pricing from rivals

Recent price bundling from Sky and Virgin Media “appears aggressive”, said telecom analysts at UBS

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BT Group PLC (LON:BT.A) and Sky have both cut broadband prices in recent days and UBS warns that it bodes badly for some rivals and well for others. 

Analysts at the Swiss bank said the “aggressive” moves by some telecoms players were an indication of how broadband pricing is going “very dynamic” over the coming weeks and months.

Two weeks ago, regulator Ofcom upped the pressure on the industry to improve “customer fairness” with new rules to encourage customers to switch between mobile and broadband contracts to remove the “loyalty penalty” where ongoing customers miss out on many of the cheapest deals. 

Since 15 February, customers have started to be notified by their provider when their contract is coming to an end and told where to find the “best price”.

The UBS analysts said the moves in pricing since then are “likely to dampen hopes that the competitive environment in UK broadband is easing”.

Moves have included Sky lowered pricing for its superfast broadband by £2 per month, BT cutting pricing by £5 per month to £34.99 after increasing it just over a week ago from £29.99. 

Bundled pricing from Sky and Virgin Media, owned by Liberty Global PLC (LON:LBTYK) “appears aggressive”, UBS said. 

With the UK communications market “at a crossroads”, the analysts see “limited growth for almost all the UK operators in the coming years”, with Vodafone PLC (LON:VOD) the only London-listed ‘buy’ recommendation as an expected UK market share winner.

Caution on BT, which extends to a ‘sell’ rating, continues as the analysts see risks around its Openreach infrastructure arm and the dividend payout, while there is also wariness over TalkTalk Telecom Group (LON:TALK) on the rising competition in broadband will squeeze it hard.

Further potential downside risk for BT is sees from reports suggesting Sky and Virgin Media are in discussions over a fibre joint venture linked to a cable wholesale deal.

Quick facts: BT Group PLC

Price: 121.3 GBX

Market: LSE
Market Cap: £12.03 billion

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