We Support BT's Long-Term Strategic Decisions; Trimming Fair Value Estimate to GBX 200

BT Group’s strategy is to own the best and most far-reaching wholesale fixed-line network (Openreach) in the U.K. to attract as many service providers as possible. Years of regulatory discussions and tensions caused BT to severely underinvest as it sought a regulatory framework that ensured acceptable returns on capital. The approval of the Equinox plan, which sets wholesale pricing for communication providers in Openreach’s network for the next 10 years seems satisfactory for BT and has caused fiber-to-the-home investments to soar. BT will deploy more than 4 million FTTH lines per year until 2026, covering around 90% of the U.K., up from less than 10% in 2019. Openreach’s network will likely be the only available option for more than 40% of U.K. households (Virgin’s network only covers 16 million households and CityFibre aims for 8 million in 2025).