RE: UBS17 Oct 2021 10:45
This Fleccy is off ii article .
The view of UBS on BT is much more pessimistic ahead of the telecoms company reporting second quarter results on 4 November. Analyst Polo Tang's anti-consensus “sell” rating is based on rising infrastructure competition for the Openreach division.
He also doubts whether the upward trend for gilt yields will be as supportive for BT's share price as many assume. There's been a relatively close correlation between the two in the past three years, but going forward the company's actuarial pension deficit is likely to be less sensitive to gilt yields due to other moving parts in calculations.
Every 110 basis point increase in gilt yields is now only a £200 million reduction in the actuarial deficit, whereas every 0.7% increase in the rate of inflation is a £1.6 billion rise in the deficit.
UBS expects BT to report weakening financials quarter-on-quarter and mixed operational trends in the Q2 results, leading to a consensus forecast showing earnings 3% lower.
There might be an update on BT's previously announced suggestion to consider a full-fibre joint venture allowing Openreach to connect up to five million more homes. The division is currently working on its own plan to spend £15 billion on upgrading 25 million homes and businesses from copper phone networks.