Broker snap: Credit Suisse sees upside at BT ahead of 'key' quarter

2nd Sep 2013 09:59

Credit Suisse has reiterated its 'outperform' rating and 350p target price for telecoms group BT ahead of the second-quarter update due next month, a 'key' quarter for the company."We see BT's Q2 update as the first chance to assess the potential impact (direct & indirect) of BT's content strategy on its underlying business. As a result key fibre and line loss KPIs are likely to prove more interesting than the Q2 financials."The second-quarter and half-year results are due to be announced on October 31st.As for wholesale fibre, Credit Suisse highlighted Sky's new broadband promotions in July which included a half-price 38Mbps fibre offer backed by a major advertising campaign. "Sky pushing fibre for the first time is the most important development in UK wireline to us in what has been a very eventful summer and positive for BT," the bank said, explaining that BT receives an additional £7-9 a month per Sky fibre customer on top of the regulated ULL fee."In Q2 we expect wholesale fibre net adds of 145,000 vs. 68,000 in the previous quarter. We expect this run rate to gradually increase over the next 12-18 months."Meanwhile, the broker said that BT's rate of line loss (230,000-280,000 over the past year, 231,000 in the first quarter) should decrease in the second quarter (to around 181,000) due to its BTSports offer. However, Sky's push on fibre is likely to lead to a slight slowdown in BT Retail's fibre net adds in the upcoming quarter, Credit Suisse said.BC