Nomura kept its 'buy' rating for telecoms giant BT Group on Tuesday saying that, while first-half results are likely to be hit by the economic downturn, it still prefers the business over sector peer Vodafone (rated 'neutral').

Both BT and Vodafone are expected to report a headline revenue decline of 7.4% in the first half, due to economic pressures and FX, Nomura said.

Organic earnings before interest, tax, depreciation and amortisation (EBITDA) at Vodafone are forecast to fall by 3%, while BT is elected to see its first reported EBITDA decline for two and a half years.

Nevertheless, the broker set out its reasons to prefer BT over Vodafone, which include accelerating structural growth drivers (such as the shift to high-speed broadband) and returning pricing power.

Meanwhile, Nomura said that BT offers secure dividend growth, while Vodafone investors are faced with uncertainty.

The broker said: "BT has not re-rated against VOD on price-to-earnings grounds in the last two years despite superior EBITDA growth and guidance that implies more of the same.

"Unless VOD can secure an increased US dividend, we expect investors to focus on consolidated operations in the near term, and we support a tighter valuation discount for BT."


BC

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BT Group (BT.A) share price
Vodafone Group (VOD) share price