BT shares: is the selling over?

They’ve lost a quarter of their value in the past two months, but one City analyst thinks BT shares may have seen the worst already.

BT Group (LSE:BT.A) investors nursing heavy losses since July were given some hope today when a leading telecoms analyst called the end of the recent slump.

Deutsche Bank’s Robert Grindle removed his “sell” recommendation after his price target of 140p was met following a 29% decline for shares in the past two months.

Grindle continues to regard the company as more expensive than telco peers, but crucially for an army of small investors he admits there may be some glimmers of hope.

These include a possible stay on planned tax rises, ongoing inflation feeding through automatically to prices and maybe the benefits of a stronger pound, which would assist domestic stocks within the FTSE 100.

• Discover more: Trading Account | Share prices today | Top UK shares

Overall, however, Grindle remains concerned about potential consumer and business weakness and the risk of higher churn in the face of higher prices and a recession.

There’s also the threat posed by the rapidly growing number of alt-nets building their own full-fibre networks in competition to BT’s Openreach division.

Deutsche Bank expects they will double their rate of fibre roll-out this year and start to see meaningful customer gains at the expense of BT retail and wholesale businesses.

Other developments have included the forming of a joint venture to roll out fibre to five million homes not currently served by Virgin Media O2’s network by 2026.

July’s funding agreement involving Liberty Global, Telefonica and InfraVia Capital also includes the opportunity to expand to an additional two million homes. This will create a fibre-to-the-home footprint of up to 23 million premises.

Openreach's full fibre network now reaches over eight million homes and businesses, and BT anticipates increasing its annual build from 2.6 million premises last year to around 3.5 million this year.

BT’s first quarter update at the end of July met City expectations, but shares fell sharply on a deteriorating performance in the Enterprise division after earnings dropped by 26.6%. The Consumer arm fared better, reflecting price rises in broadband as revenues rose 5%.

Chief executive Philip Jansen said: "The modernisation of BT Group remains on track. We are delivering and notwithstanding the current economic uncertainty we remain confident in our outlook for this financial year."

• BT shares crash 10%, but dividend is back at Centrica
• Two big dividends for adventurous income seekers
• Chart of the week: can Lloyds Bank shares continue this recovery?

Despite his comments and the wider speculation concerning the 18% stake built by French billionaire Patrick Drahi, shares have fallen from 196p in July to as low as 139p last week. Grindle issued his “sell” recommendation in June, with the shares down by about 20% since then to justify his bearish stance.

Other analysts are more optimistic on the outlook, with Morgan Stanley having a price target of 250p in the aftermath of July’s first quarter results. Last week, Berenberg removed its “buy” recommendation but continues to see an upside to 190p.