Nomura downgrades BT to 'neutral', cites regulatory risk

(ShareCast News) - Nomura downgraded BT Group to 'neutral' from 'buy' and cut its price target to 490p from 560p.The Japanese bank said it senses a negative shift in regulatory risk, which along with renewed public sector headwinds dents its confidence in BT achieving its target of profitable top-line growth for the medium term."Without top-line growth, we think further rating expansion relative to telecom peers will be difficult and we downgrade to neutral," it said.It forecasts a three-year revenue compound annual growth rate of -0.2% down from a previous estimate for growth of 0.8% and cut its full-year 20120 EBITDA estimate by 4.4%.Nomura said Ofcom's review of BT's cost attribution rules threatens to strip away material cost from Ofcom's regulated products.In addition, the bank said it anticipates renewed pressure on BT's public sector revenue streams."We expect renewed pressure on public sector budgets with the new government's Autumn Spending Review, and, in particular, we are concerned about the impact of a new government framework designed to secure efficiencies from centralised procurement and to allocate more business to small and medium-sized suppliers."It added that pricing pressure and market share loss seem likely for BT.Finally, Nomura said that the implications of a combination between Vodafone and Liberty Global, which it expects to happen, are negative for BT.At 1438 BST, BT shares were down 0.1% at 414.45p.