Proactive Investors - BT Group PLC (LON:BT.A) should see revenue growth “powerfully reinforced” by a big above-inflation price hike this year, reckon analysts at Jefferies, with other rivals also likely to make similar increases around the same time.
This was one of several “tailwinds” that the investment bank’s analysts see for the FTSE 100 telecoms group in 2023, which backs up a ‘buy’ rating on the shares.
Pricing is forecast to provide around a £700mln of this positive buffeting force from the CPI+3.9% price hike in March, along with the recent wage deal that “improves visibility on costs”, with increased fibre sales as Openreach’s roll-out continued “could add a further [circa] £100mln” of revenue.
However it is “not plain sailing”, they added, snipping their share price target to 190p from 250p as there are three “overhangs”.
The first of these is compression of free cash flow in the 2024 financial year from around £400mln of higher taxes and around £50-100mln from the BT Sport disposal.
Reducing the price target reflects a prudent valuation of the pension deficit given £13bn value attributed to unquoted assets.
Furthermore, management have an “incentive to speak cautiously given Equinox/price sensitivities”, the analysts added, referring to the wholesale price reset.