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BT boardroom upheaval doesn’t point to Openreach stake sale, says UBS

Published: 14:00 08 Mar 2021 GMT

BT Group PLC -
Several hurdles ahead says UBS

Swiss bank UBS has poured cold water on suggestions that the recent change at the top of BT Group PLC (LON:BT.A) might see network arm Openreach all or partly sold.

Sky News ran a story last week that chief executive Philip Jansen had given the telco's board an ultimatum that he would leave unless chairman Jan du Plessis was replaced.

Du Plessis announced his retirement a week ago, leading to speculation over the future of Openreach, which Jansen is reportedly much more open either to sell or to allow a minority partner to take a stake.

BT shares rallied strongly last week on suggestions of a change in direction at Openreach and also from talk that it would benefit from the super-deduction investment measures brought in by the Chancellor in the Budget, but UBS also doubts this.

“We see the move in the BT share price as overdone - the tax changes from the UK Budget are a net negative and we believe a stake sale in Openreach is less likely in the near term.

BT faces a number of hurdles in the coming quarters where UBS sees the risks being underestimated.

“Specifically, BT faces: An imminent and potentially expensive UK spectrum auction; Uncertainties on returns at Openreach beyond 2031; Rising competition at Openreach from Virgin Media and potentially closer co-operation between Sky/Virgin Media; A potentially significant actuarial pension deficit of £10.9bn (gross) that could constrain the dividend and M&A options for the company.”

Also, while super-deduction means a short-tern tax benefit, the longer impact on earnings from higher corporation tax outweighs this.

UBS said it sees the move in the BT share price as overdone - the tax changes from the UK Budget are a net negative and we believe a stake sale in Openreach is less likely in the near term.

The broker has reduced its price target to 102p from 111p and sell is its investment stance.

Shares eased 2% to 138.4p.

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