Investing.com -- Shares of BT Group (LON:BT) fell sharply on Tuesday, dropping more than 5% after financial services giant Morgan Stanley (NYSE:MS) significantly reduced its stake in the telecom company.
The move, which was disclosed in a filing with the London Stock Exchange (LON:LSEG), saw Morgan Stanley’s holdings in BT Group drop below the 5% threshold, triggering a regulatory notification.
According to the filing, Morgan Stanley’s total holding in BT Group fell to 4.99% as of February 13, down from a previous position of 5.03%.
The disposal was attributed to portfolio adjustments, with the bank invoking a trading book exemption, a mechanism that allows financial institutions to make changes in their holdings without long-term strategic intent.
BT Group, one of the UK’s leading telecommunications providers, has faced persistent challenges in recent years, including regulatory pressures, increased competition, and high infrastructure investment costs.
The company has been undertaking a major restructuring effort, with plans to cut thousands of jobs and modernize its network, but investor confidence remains fragile.
Adding to the negative sentiment, Citi Research downgraded BT Group’s stock from “neutral” to Sell and lowered its target price to £1.12 from £2, citing long-term revenue concerns for Openreach and sustainability risks for BT Consumer’s pricing model.
Citi analysts forecast Openreach turning to revenue decline in 2025/26 and staying there for the rest of the decade, which could lead to skepticism over BT’s ability to post its guidance for £3 billion of normalised free cash flow by the end of the decade, with Citi’s own estimates for 2029/30 at £2.3 billion.
Additionally, Citi’s consensus tracker analysis suggests that market expectations are overly optimistic in predicting a reduction in restructuring costs, estimating £401 m for 2025/26 compared to the consensus of £250 million. The downgrade also saw BT added to Citi’s focus list.