{"id":16044,"date":"2018-05-04T08:43:08","date_gmt":"2018-05-04T07:43:08","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=16044"},"modified":"2018-05-04T14:24:30","modified_gmt":"2018-05-04T13:24:30","slug":"barclays-hit-bt-share-price-over-wholesale-fibre-optic-competition","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2018\/05\/barclays-hit-bt-share-price-over-wholesale-fibre-optic-competition.html","title":{"rendered":"Job Fears as Barclays Hit BT Over Wholesale Fibre Optic Competition"},"content":{"rendered":"

Barclays has cut its rating on BT<\/a> from “overweight<\/em>” to “equal weight<\/em>” and reduced their price target on shares by 20% to 280p. The broker reasons that BT<\/a>’s network access division (Openreach<\/a>) is coming under pressure in the UK wholesale market from rival “full fibre<\/em>” (FTTP<\/a>\/H) broadband ISPs.<\/p>\n

Readers of ISPreview.co.uk will no doubt already be familiar with the changing structure of the United Kingdom’s fixed line broadband market, which over the past year has seen a growing variety of alternative network providers (AltNets) announce major investments in new fibre optic networks (check out our ‘Summary of Full Fibre Broadband Plans<\/strong><\/a>‘).<\/p>\n

At present only around 4% of the UK (1.2 million premises) can access a Gigabit capable Fibre-to-the-Premises<\/strong> (FTTP<\/a>) style broadband network. However it remains to be seen precisely how many of the big commitments by AltNet ISPs will turn into actual networks or merely end up overbuilding existing networks. Nevertheless the level of investment involved shows that there is serious weight behind almost all of the projects.<\/p>\n

Barclays Statement<\/strong><\/p>\n

“We see ‘wholesale-only’ providers potentially shifting the risk-reward profile for FTTH<\/a> investment in Europe, principally in markets such as the UK and Germany where there is a heavy reliance on the incumbent for wholesale access, and a lack of existing FTTH<\/a> infrastructure … an acceleration of FTTH<\/a> investment looks to us all but inevitable.”<\/p><\/blockquote>\n

The analyst notes that BT<\/a>, as an incumbent, will find it hard to create the right balance of wholesale pricing (hardly a surprise given the weight of regulation they face) vs their newer rivals. At the same time Openreach<\/a> is currently being seen by Ofcom<\/a> and the government as dragging its feet (example<\/a>), which is despite the fact that they are ramping up to have one of the biggest and fastest FTTP<\/a> deployments to 3 million UK premises by the end of 2020 (plus 10 million premises with 100Mbps+ hybrid fibre G.fast<\/a><\/strong> by the same date).<\/p>\n

The operator also aspires to reach 10 million premises with FTTP by around 2025, although they’ve yet to turn that aspiration into a concrete commitment. Openreach<\/a> suggest that in order to do that they’ll require softer regulation, reduced logistical barriers (permissions \/ planning etc.) and the ability to switch-off old copper networks as areas adopt FTTP (this is complex and rivals with an investment in copper services could obstruct).<\/p>\n

Luckily AltNet providers don’t have to worry about the same regulatory baggage and most of them are focused on tackling the easy low hanging fruit in urban areas, which could spell trouble for Openreach if they are perceived to be stalling for too long while trying to make a decision.<\/p>\n

Sadly none of this debate will help to solve the challenge of pushing FTTP out to the other, more challenging, half of the UK where so far only a few AltNet ISPs (B4RN<\/a>, Gigaclear<\/a> etc.) and Openreach’s state aid supported deployments have dared to venture with FTTP.<\/p>\n

Barclays also revised down their forecasts for BT’s profit in 2019 and 2020. The operator’s share price has since taken another tumble.<\/p>\n

UPDATE 12:34pm<\/strong><\/p>\n

Morgan Stanley has added to today’s news by predicting that BT could cut its future dividends to prioritise investment in fibre optic broadband.<\/p>\n

On top of that Exane BNP Paribas have claimed that BT could seek to cut up to another 6,600 jobs in order to save \u00a3500m over the next 3 years and boost their share price, although this does come after they pledged to hire another c.3,500 Openreach engineers (the future job cuts aren’t expected to impact their engineers and may focus more on office staff).