BT to benefit from catalysts in new year - UBS

BT Group shares could benefit from a series of potential catalysts in coming months, believes UBS, including good news on its pension deficit and about its Openreach arm.

UBS, which upgraded its recommendation on BT shares to 'buy' from 'neutral' and raised it price target to 330p from 310p, said the prime reason was it forecasts a lower pension deficit of £6.5bn gross versus the consensus of £11-12bn.

"On pensions, we note BAE and Tesco surprised positively in their recent triennial reviews, and we think the same could be true of BT," the Swiss bank's analysts said in a note to clients, also predicting Premier League football broadcasting rights will be flat in February's auction.

Openreach could make a pretax return of 8-12.5% on fibre-to-the-home under conservative assumptions analysts.

With Openreach is due to give an update on FTTH economics in the coming weeks, they said: "We also think government support could reduce or reverse regulatory cuts on wholesale fibre (WLA) pricing – an update is due February 2018 – and this could mark the start of an inflection in earnings momentum."

On pensions, news is felt to be likely in January about changes in indexation of benefits for certain scheme members, as well as the potential ending of the defined benefit scheme for existing employees.

"An agreement with the pension trustees on the deficit looks likely by May 2018, but could come sooner."