BT Group PLC (LON:BT.A) shares have fallen 16% this year following disappointing third quarter results, an unfavourable court ruling on its pension scheme and fibre broadband upgrade announcements from competitors.
Following the decline in the telecoms giant’s shares, Deutsche Bank has upgraded the stock to ‘hold’ from ‘sell’ but left its target price unchanged at 248p.
READ: BT's quarterly profits fall as costs continue to rise but full year guidance unchanged
Earlier this month, BT reported a 2% drop in third quarter underlying earnings (EBITDA) to £1.83bn, missing analysts’ estimates of £1.84bn.
It blamed the lower profits on an increase in costs resulting from its investment in launching new smartphones – including the new iPhone 8 and iPhone X –along with higher business rates and pension costs.
BT has trimmed some of its costs by paying less to secure broadcast rights for Premier League football games. It is paying £295mln a season for 32 games, down from the £320mln previously paid.
READ: Sky and BT to pay £4.464bn for Premier League football broadcast rights
BT's pension deficit and FTTP plans
But the company is still trying to cut its pension deficit. The company is currently appealing a court decision against its bid to link pension payments to a lower measure of inflation.
BT is also spending more to deliver so-called fibre to the premises (FTTP) to improve broadband speeds for more than three million homes by 2020. It hopes to pass some of the costs on to wholesale customers but regulators are clamping down on price rises while other broadband providers have announced similar plans.
READ: BT's Openreach to connect fibre broadband into 3mln premises by 2020
Vodafone Group PLC (LON:VOD) is investing in its own full fibre network in partnership with CityFibre and plans to connect one million homes by 2021.
“An FTTP target raise and a decent English Foot League outcome should have helped but the market is concerned that conditional FTTP is eroding political support and that rate of return regulation is being replaced by infrastructure competition,” Deutsche Bank said.
Shares in BT climbed 0.22% to 231p in midday trade.