Investing.com -- Bouygues (OTC:BOUYY) (EPA:BOUY) shares fell on Thursday after the Telecon giant lowered its fiscal year 2026 guidance for its telecom division.
At 4:33 am (0833 GMT), Bouygues was trading 5% lower at €28.60.
The downward revision signals growing concerns about the future performance of Bouygues Telecom, as it expects modest growth in revenue and EBITDA compared to its previous forecasts.
“Whilst we were already sitting below the previous guidance, this expected 'modest' 2023-26 growth compares to our current forecast of 9% revenue growth and 14% EBITDAaL growth, crystallizing our concerns on downside risk on our numbers,” said analysts from Morgan Stanley (NYSE:MS) in a note.
In its updated guidance, Bouygues Telecom projected only modest growth in sales from services and EBITDAaL for the years 2023 to 2026, a stark contrast to the more aggressive growth rates of over 15% and 25%, respectively, initially indicated.
This shift flags the pressures the telecom industry is facing, particularly from intensified competition and a changing consumer landscape.
Moreover, the company has made adjustments to its capex plans, reducing its guidance from 2025 onward. Bouygues Telecom believes it is ahead of its coverage and quality targets, leading to a reassessment of investment needs in a market characterized by slower mobile data usage growth.
“We believe this capex cut chimes with recent moves we saw among altnets who have entered a cash preservation mode,” the analysts said.
Despite maintaining its free cash flow guidance for fiscal year 2026, the unchanged figure comes with caveats, as it excludes working capital changes that could pressure cash flow in the near term.
Investors are keenly aware that any future tax rate increases in France could also add to the strain on Bouygues’ financial performance.
In a bid to rejuvenate its market position, Bouygues announced the launch of a new brand, B.iG, set to debut on October 7. This innovative range of family-focused, multi-line offers includes competitive fiber plans and significant discounts for households adding mobile lines.
With discounts reaching up to €10 per month per line for families with multiple mobile subscriptions, Bouygues aims to capture a larger share of the B2C market.
However, these offers could also lead to dilution of margins and intensify competitive pressures within the telecom sector.
The new B.iG offerings come in the wake of similar launches by competitors like Iliad, which has introduced its own family plans with limited discounts. Bouygues claims that customers could save up to €564 annually for four mobile lines, outpacing Iliad's advertised savings of €480.
Nevertheless, this pricing strategy raises concerns about the potential for increased competition and pricing turbulence, as rivals like Orange and SFR may respond to Bouygues' bold moves.