Deutsche Bank has downgraded Telecom Plus, shifting its recommendation from "buy" to "hold" and reducing its price target to 1300p from 2000p. That revised target is set against a last closing price of 1166p, which the bank calculates implies an upside of around 11% from that closing level.
On the market reaction, shares of the British group were lower, falling 9.4% at 06:42 ET (10:42 GMT) on the day the note was published.
Analyst John Karidis, in his write-up accompanying the downgrade, articulated concerns over the operational effectiveness of Telecom Plus's current strategy. Karidis said the company's "business model is struggling to work."
He referenced how Telecom Plus describes its customer acquisition approach in its FY25 annual report, quoting the company as saying it uses a "unique and hard-to-replicate word-of-mouth acquisition model." The annual report language also frames the group's structure as providing "a structural cost advantage as it has multiple revenue streams but only one set of overheads, unlike competitors," a benefit Telecom Plus then shares "with its customers through lower prices."
Karidis further noted a set of incentives related to the broader consumer environment. He stated that, in theory, the cost-of-living crisis gives households additional motivation to sign up as Telecom Plus multiservice customers to maximise utility bill savings. At the same time, he said this environment could encourage Telecom Plus Partners, the company's distributor network, to recruit multiservice customers in order to maximise their commissions.
The downgrade and comments from Deutsche Bank focus attention on whether Telecom Plus can continue to convert its claimed structural advantages and word-of-mouth acquisition approach into the growth and margins implied by its previous valuation.
Editor note: This report is based solely on the information contained in the analyst note and the company's FY25 annual report excerpts cited by the analyst.