Barclays downgrades BT as fibre competition intensifies, cuts price target to 150p

Investing.com -- BT Group (LON:BT) has been downgraded by Barclays (LON:BARC) analysts to an "underweight" rating, citing mounting competitive pressures in the UK broadband market and a likely acceleration in market share losses, in a note dated Monday. 

The downgrade comes as BT faces an increasingly aggressive fibre broadband rollout by alternative network providers (AltNets) and established competitors such as Virgin Media O2.

Barclays now projects that BT’s network division, Openreach, will lose around 900,000 broadband subscribers in the fiscal year 2026. 

This forecast surpasses the company’s own estimates, which had previously indicated an expected loss of 400,000 broadband customers annually. 

As a result, Barclays has revised its price target for BT’s stock downward to 150p from 190p, reflecting the anticipated market share erosion and financial pressures the company is likely to endure.

The UK broadband market has become increasingly competitive, with fibre-to-the-premises (FTTP) coverage expanding rapidly. 

Currently, around 75% of UK homes have access to full-fibre broadband, a number expected to rise to 90% within the next two to three years. 

A major challenge for BT stems from overbuild—about 35% of UK fibre-enabled homes now have access to two or more FTTP networks, a figure Barclays expects to rise to 70% over the next few years.

Openreach, which continues to expand its fibre network at a rate of about four million new premises per year, is facing stiff competition from AltNets, which are matching this rollout pace. 

AltNets are offering lower pricing in an attempt to secure customers and gain wholesale deals with independent internet service providers such as Sky, Vodafone (NASDAQ:VOD), and TalkTalk. 

This aggressive pricing strategy has put pressure on BT’s wholesale and retail operations, as many customers now have viable alternative providers.

Adding to BT’s challenges is the impending merger of Vodafone UK and Three UK, which Barclays suggests could further disrupt the broadband sector. 

Vodafone has signaled an increased focus on broadband, aiming to leverage its partnerships with Openreach and CityFibre while exploring fixed wireless access solutions to target legacy copper broadband customers. This shift could contribute to higher broadband churn rates for BT.

Financially, Barclays values Openreach at approximately £27 billion, applying a 6.6x enterprise value to forecasted earnings before interest, taxes, depreciation, and amortization for the fiscal year 2026. 

This valuation sits well below comparable transactions in the telecom sector, reflecting the expectation of continued customer attrition. 

Barclays has also revised its earnings forecasts for BT, lowering fiscal year 2026 EBITDA estimates to £8.23 billion, about £100 million below market consensus.

Despite the growing challenges, BT continues to invest heavily in its fibre network expansion.

However, Barclays remains skeptical about the company’s ability to stabilize its broadband customer losses, particularly given the continued capital deployment by AltNets and ongoing pricing pressures.