Broker snap: Battered BT battles back

12th Jun 2009 13:12

The share price of telecoms giant BT has taken a battering this year as the company has struggled to get to grips with its troublesome Global Services unit, but Merrill Lynch believes the shares are now low enough to be worth buying.The US broker reckons that the problems at Global Services and the worries over the company's pension deficit are factored into the price. Adding to the optimistic picture for the stock, the company has cost savings in the pipeline while the recent ruling by telecoms regulator Ofcom on the prices BT can charge rivals for using its lines was favourable to the former state-owned telecom firm.Ofcom said will allow BT to raise the price it charges its rival for broadband line rentals by just under 6%, but is still mulling over charges for old-style telephone services.The broker has raised its price target for the stock from 110p to 130p and upgraded its recommendation from 'neutral' to 'buy'. Merrill Lynch's forecast for earnings before interest, tax, depreciation and amortisation (EBITDA) for 2010/11 has been upped by 2% to £5.6bn, while EBITDA for 2011/12 is now forecast to hit £5.73bn, an upgrade of 3% on Merrill's previous estimate.