According to UBS telecoms analysts, although the consumer price rises of BT Group PLC (LSE:BT.A), may have a positive impact on investor sentiment, they may not have the expected net effect.
Analysts at the Swiss bank pointed out that although the price rises of 14.4% (CPI plus 3.9%) in April “suggests upside risks to BT Consumer estimations”, BT shares have already risen by 15% in the year ahead of the event.
UBS analysts also worry about price interventions by the government or regulator. They point out comments made by the culture secretary, “imposing above inflation price hikes isn’t the right thing to do”, while Ofcom is currently reviewing whether CPI+ increases were made obvious to consumers when they signed-up.
They also pointed out that a 9.3% price increase at BT Consumer in 2022 did not translate into EBITDA increases due to cost inflation and downgrades elsewhere within the business. Analysts believe UK operators will be able to manage price rises in 2023. However, consumer pressures are increasing in the UK.
According to UBS analysts, Vodafone is expected to win the UK market share. Investors will be focused on German trends, whether they can improve, and the appointment of a CEO. Etisalat’s intentions regarding its stake will be clarified.
BT believes that the shares will be volatile, with upside potential for Consumer offset by increasing infrastructure competition for Openreach as well as uncertainty about the pension deficit.
BT shares were 1.7% lower at 125.80p during midday trading on Thursday.