UBS warns of wholesale threat to broadband profits, stays negative on BT and Vodafone Proactive uses images sourced from Shutterstock
UBS has flagged mounting pressure on UK retail broadband pricing from proposed cuts to wholesale charges, reinforcing ‘sell’ ratings on both BT Group PLC (LSE:BT.A) and Vodafone Group PLC (LSE:VOD).
The bank published its quarterly review of UK broadband and mobile pricing, describing a market that remains intensely competitive.
Alternative networks and mobile virtual operators are pricing more than 30% below the major players in broadband and mobile respectively.
Broadband pricing recovered somewhat in July after cuts in June, with BT, Vodafone and Sky raising selected tariffs by £1 to £3 a month.
The central concern is a set of wholesale promotions proposed by Openreach, BT’s network arm, which are subject to approval by the regulator Ofcom.
These include a cap of £19.32 a month on the line rental internet providers pay for new and upgraded fibre lines from 1 July.
From October, Openreach also proposes further discounts of £9.50 a month to providers that exceed set volume thresholds, effectively halving pricing to lock in minimum volumes.
UBS said the moves should help reduce line losses at Openreach but would remove revenue growth and hurt BT’s consumer business.
The bank drew a parallel with September 2025, when retail broadband pricing stepped down after Sky moved subscribers onto rival CityFibre’s network.
On BT, which UBS rates ‘sell’ with a 175p price target, the bank sees weakening earnings trends into the first half of the 2027 financial year.
It expects core earnings to fall around 2% amid marketing investment and top-line pressure, before a recovery in the second half.
UBS also rates Vodafone ‘sell’, with a 95p target, citing slowing momentum in Germany and a lack of positive catalysts after the end of its share buyback.
It noted that both companies’ dividend yields have rarely traded below 10-year gilt yields, which it expects to constrain the shares.
On Liberty Global (NASDAQ:LBTYA), owner of Virgin Media O2, UBS stayed ‘neutral’ and trimmed its price target to $12.10 from $12.60.
The bank pointed to continued pressure on cable revenues in the UK and complexity around a fibre deal with Nexfibre and Netomnia.