On Tuesday, Citi reaffirmed its Buy rating and GBP2.00 price target for BT Group Plc (LON:BT/A:LN) (NYSE: BT) stock, following the news of Bharti Global's agreement to acquire a 24.5% stake in the company from Patrick Drahi's Altice UK. The transaction will proceed with an immediate purchase of a 10% interest, while the remaining stake awaits regulatory approval.
The analyst from Citi noted the UK government's National Security and Investment Act 2021, which allows the government to examine and possibly intervene in acquisitions that may impact national security. However, the past approval of Altice's stake increase from 12% to 18% in BT suggests that regulatory barriers are likely minimal for this deal.
Bharti Global has clarified that it does not intend to pursue a takeover of the entire BT company. This statement comes as a reassurance to the market, which may have been speculating about Bharti's intentions following the stake purchase announcement.
Citi's analysis suggests that the acquisition by Bharti Global should be viewed as a positive event for BT Group's stock. The investment by a reputable firm is likely to alleviate some of the immediate market concerns surrounding the company's ownership structure.
The analyst's commentary emphasized that the stake acquisition could remove the "near term overhang concerns" related to BT Group. This development is expected to contribute positively to the company's share performance in the foreseeable future.
In other recent news, Citi has maintained its 'Buy' rating on BT Group's stock, despite an anticipated short-term dip in EBITDA. The firm cites factors such as lower price increases, pressure on Consumer Average Revenue Per User (ARPU), and higher salary inflation as contributors to an expected 4% year-over-year decrease in EBITDA for the first quarter of the 2025 fiscal year.
However, Citi also anticipates a recovery in EBITDA trends during the second half of the year, as BT Group begins to benefit from its cost efficiency program and faces easier comparisons.
The analysis also suggests a modest quarter-over-quarter deterioration in Openreach's line losses due to limited market growth and increased competition. Despite these near-term pressures, Citi remains positive about the long-term prospects of BT Group, especially the value of its Openreach division.
These recent developments underscore the potential for BT Group's strategic initiatives to offset immediate pressures on revenue and earnings before interest, taxes, depreciation, and amortization.
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